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Administrative Conference of the United States 






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Conference 
of the 
United States 



menaatio 
and Reports 

1987 



Volume I 



Administrative Conference of the United States 



The Administrative Conference of the United States was established by statute as on 
independent agency of the federal government in 1964. Its purpose is to promote 
improvements in the efficiency, adequacy and fairness of procedures by which federal 
agencies conduct regulatory programs, administer grants and benefits, and perform 
related governmental functions. 

To this end, the Conference conducts research and issues reports concerning various 
aspects of the administrative process and, when warranted, makes recommendations 
to the President, Congress, particular departments and agencies, and the judiciary con- 
cerning the need for procedural reforms. Implementation of Conference recommen- 
dations may be accomplished through direct action on the part of the affected agencies 
of legislative changes. 



RICHARD K. BERG 

t2.{r> 2.vm ST. \. 

AHLI^(,T()^. V A. 2220-Mi 




I 



Administrative 
Conference 
of ttie 
United States 

Recommendations 
and Reports 

1987 

Volume I 



Cite as: 
1987 ACUS 



CONTENTS 



VOLUME I 



RECOMMENDATIONS and STATEMENT of the 

Administrative Conference of the United States 

Recommendation 87-1: Priority Setting and Management 

of Rulemaking by the Occupational 

Safety and Health Administration 3 

Federal Protection of Private Sector 

Health and Safety Whistleblowers 9 

Agency Hiring of Private Attorneys. ..15 

User Fees 23 

Assuring the Fairness and Acceptability 

of Arbitration in Federal Programs. .26 
State-Level Determinations in Social 

Security Disability Cases 30 

A New Role for the Social Security 

Appeals Council 36 

National Coverage Determinations 

Under the Medicare Program 43 

Dispute Procedures in Federal Debt 

Collection 49 

Regulation by the Occupational Safety 

and Health Administration 53 

Alternatives for Resolving Government 

Contract Disputes 60 

Adjudication Practices and 

Procedures of the Federal Bank 

Regulatory Agencies 70 

Resolution of Freedom of Information Act 

Disputes 75 



Recommendation 87-2: 

Recommendation 87-3: 
Recommendation 87-4: 
Recommendation 87-5: 

Recommendation 87-6: 

Recommendation 87-7: 

Recommendation 87-8: 

Recommendation 87-9: 

Recommendation 87-10 

Recommendation 87-11 

Recommendation 87-12 



Statement 12: 



REPORTS for RECOMMENDATIONS AND STATEMENT 

Rec. 87-1: Thomas O. McGarity and Sidney A. Shapiro. 

OSHA Rulemaking Procedures 79 

Rec. 87-2: Eugene R. Fidell. Federal Protection of Private 

Sector Health and Safety Whistleblowers 219 

Rec. 87-3: William V. Luneburg. Contracting by the Federal 
Government for Legal Services: 

A Legal and Empirical Analysis 279 

Ronald D. Rotunda. Ethical Problems in 

Federal Agency Hiring of Private Attorneys 409 



HI 



IV 



Rec. 87-4: Clayton P. Gillette and Thomas D. Hopkins. 

Federal User Fees 451 

Rec. 87-5: Harold H. Bruff. The Constitutionality 

of Arbitration in Federal Programs 533 

Rec. 87-6: Allen E. Shoenberger. State Disability 

Services' Procedures for Determining and 
Redetermining Social Security Claims for the 
Social Security Administration 579 

Rec. 87-7: Charles H. Koch, Jr. and David A. Koplow. 

The Fourth Bite at the Apple: A Study of the 
Operation and Utility of the Social Security 
Administration's Appeals Council 625 



VOLUME n 

Rec. 87-8: Eleanor D. Kinney. National Coverage Policy 
Under the Medicare Program: Problems and 
Proposalsfor Change 833 

Rec. 87-9: Martin B. White. Offset Dispute Procedures 

Under the Debt Collection Act of 1982 939 

Rec. 87-10: Thomas O. McGarity and Sidney A. Shapiro. 

OS HA Regulation: Regulatory Alternatives and 
Legislative Reform 999 

Rec. 87-11: Eldon H. Crowell and Charles Pou, Jr. Appealing 
Government Contract Decisions: Reducing the 
Cost and Delay of Procurement Litigation 1139 

Rec. 87-12: Michael P. Malloy. Adjudication Practices and 
Procedures of the Federal Bank 
Regulatory Agencies 1215 

Stmt. 12: Mark H. Grunewald. Administrative Mechanisms 
for Resolving Freedom of 
Information Act Disputes 1341 

SELECTED CONSULTANT REPORT: 

Ronald A. Cass. The Discretionary Function Exception 

to the Federal Tort Claims Act 1503 



RECOMMENDATIONS 

AND 

STATEMENT 



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OFFICIAL RECOMMENDATIONS 



RECOMMENDATION 87-1: 
PRIORITY SETTING AND MANAGEMENT OF 
RULEMAKING BY THE OCCUPATIONAL SAFETY 
AND HEALTH ADMINISTRATION 



The Administrative Conference has undertaken a study of the 
rulemaking process at the Occupational Safety and Health 
Administration. It is recognized that OSHA's mandate to regulate 
any substance or hazard that poses a significant risk to workers 
and, to the extent feasible, make every workplace safe is daunting, 
and that alternative approaches to substance-by-substance 
regulation may be necessary. The Conference plans to address this 
larger issue in its continuing study. In this recommendation, the 
Conference suggests procedures that OSHA can institute 
administratively to improve two aspects of its current process for 
developing health and safety standards. 

In Part 1, the Conference recommends to OSHA a procedure 
for systematically setting long-term priorities for promulgating 
standards for regulating health and safety hazards. Once 
established, the recommended regulatory priorities lists will serve 
as a baseline against which additions or modifications of the lists 
can be considered. The task of developing the priority lists would 
be assigned to a permanent, internal agency committee, with 
additional representation from the National Institute for 
Occupational Safety and Health (NIOSH). The committee would 
work closely with other health and environmental agencies in 
developing initial priority lists which would be submitted for 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



decision to the Assistant Secretary for Occupational Safety and 
Health, Department of Labor. ^ 

Although these regulatory priorities lists should generally 
govern when OSHA initiates rulemaking, the Conference does not 
intend that this priority-setting process should in any way 
diminish the Assistant Secretary's authority to promulgate rules on 
an expedited basis under the Occupational Safety and Health Act 
or the Administrative Procedure Act. Moreover, the 

recommendation (in paragraph l.d.) takes account of the need for 
an expedited priority decision process in certain situations, such as 
referral by the Environmental Protection Agency of rulemaking 
topics under the Toxic Substances Control Act or the filing of 
rulemaking petitions. 

The Conference believes that the procedures suggested in Part 
1 would be infeasible if OSHA's regulatory priority rankings could 
be challenged in suits for judicial review. Therefore, the 
Conference urges that the regulatory priorities lists not be treated 
as rules for which judicial review would be appropriate.^ 
Nonetheless, public participation is desirable, and the Conference 
sets forth specific steps OSHA should take to involve the public in 
its priority-setting process. 

Part 2 of the recommendation suggests procedures for OSHA's 
management of rulemaking. The Conference's study revealed the 
need for systematic monitoring of the progress of individual 
rulemakings and for greater coordination at the staff and policy 
levels. Thus, the recommendation suggests that OSHA adopt a 
computer-based tracking system, a team approach to rulemaking, 
and an options review process to involve high-level agency 
policymaking officials in designated major rulemakings. 



^In 1982 the Conference addressed the importance of 
interagency cooperation in identifying and ranking potentially 
cancer-causing chemicals for regulation and recognized the 
important role played by the National Toxicology Program in 
fostering such cooperation, see ACUS Recommendation 82-5, 
Federal Regulation of Cancer-Causing Chemicals, Part II, 1 CFR § 
305.82-5. 

^The tentative nature of agency rankings and the need for 
flexibility were previously recognized by the Conference in 
considering priority-setting for the regulation of cancer-causing 
chemicals. See ACUS Recommendation 82-5, id.. Part I, ^5. 



OFFICIAL RECOMMENDATIONS 



The Conference does not intend either the priority-setting or 
management procedures in this recommendation to affect OSHA's 
compliance with any other procedural requirements to which it is 
subject pursuant to statute or executive order. 

RECOMMENDATION 

1. Setting of Priorities for Rulemaking . This part 
recommends procedures that the Occupational Safety and Health 
Administration should follow in establishing priorities for 
promulgating standards for regulating health and safety hazards. 

a. Regulatory Priorities Committee. OSHA should 
establish a permanent committee charged with developing 
regulatory priorities which, once they are approved by the 
Assistant Secretary for Occupational Safety and Health, 
Department of Labor, will presumptively apply when the 
agency undertakes rulemaking to establish health and safety 
standards. 

(1) This committee should include high-level 
management officials and experienced professionals from 
OSHA and a representative from the National Institute for 
Occupational Safety and Health (NIOSH). To provide 
continuity, committee members should be appointed for 
staggered terms and be eligible for reappointment. The 
committee should otherwise be no larger than necessary to 
discharge its duties. 

(2) OSHA should provide adequate staff support for 
the committee and additional resources as necessary to 
enable it to gather information on potential rulemaking 
topics and, where appropriate, to perform risk assessments 
and priority-setting. 

(3) The committee should establish initial priority lists 
for health and safety regulation and, thereafter, meet 
regularly to consider additions, deletions or revisions of the 
lists and to conduct periodic reviews. 

(i) In developing an initial priority list, the 
committee should use existing information, including 
risk assessments and other technical and policy 
considerations. The committee should avoid elaborate 



6 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

risk assessments or weighting systems, and it should 
not incorporate by reference lists prepared by other 
agencies for other purposes. 

(ii) It may be appropriate, however, for the 
committee to utilize more sophisticated risk 
assessments or weighting systems when it conducts a 
periodic review of, or considers modifications to, a 
priority list. 

(4) OSHA should work closely with NIOSH, other 
relevant health and environmental agencies, and the 
National Toxicology Program in developing its initial 
priority lists and in revising these lists. In addition, OSHA 
and NIOSH should establish procedures that will permit 
rapid exchanges of information on projects that OSHA 
assigns to the expedited decision process (see paragraph d. 
below). 

b. Judicial Review . The Assistant Secretary's decision 
to place a topic on a regulatory priorities list, the ranking 
of a topic on a list, and subsequent modification of a 
topic's priority on a list should not be treated as rules for 
which judicial review would be appropriate. However, the 
Assistant Secretary should allow public participation in the 
priority-setting process (in accordance with paragraph c. 
below) and provide an explanation of priority decisions. 

c. Public Participation . OSHA should take the following 
steps to involve the public in its regulatory priority-setting 
process: 

(1) Before establishing the initial priority lists, OSHA 
should hold public workshops at which interested persons 
are invited to comment on regulatory priorities. 

(2) The results of meetings of the regulatory priorities 
committee should be made public after the Assistant 
Secretary has had an opportunity to review any proposed 
decisions of the committee. 

(3) The Assistant Secretary should publish for public 
comment the proposed initial priority lists of rulemaking 
topics and, thereafter, any proposed modifications to the 



OFFICIAL RECOMMENDATIONS 7 

lists. The topics on the lists should either be ranked 
individually or assigned to classes. 

d. Expedited action . Once the initial priority lists are 
developed, OSHA should establish a procedure for expediting 
priority decisions on additional topics or modifications that 
are presented by referrals from EPA under the Toxic 
Substances Control Act, rulemaking petitions, or requests 
from Congress, the President, or other agencies. While 
separate from the agency's routine priority-setting process, 
this expedited process should be coordinated with it. The 
outcome of the expedited process should be the placement of 
the topic on the appropriate list, modification of a list {e.g., 
deletion or changed ranking of a topic), or a determination 
not to place, or modify the placement of the topic, on the list, 
together with a public explanation for the action. 

2. Management of the Rulemaking Process . This part 
recommends procedures that OSHA should adopt for the 
management of its rulemaking process. 

a. Action Tracking System . OSHA should establish a 
computer status system to set deadlines for meeting 
established milestones in rulemaking and to provide for 
systematic review of the progress of ongoing rulemaking. 
Under this system, management officials, representing all 
interested agency components, should meet at regular intervals 
with the Assistant Secretary or a Deputy Assistant Secretary to 
discuss progress toward designated milestones. 

b. The Team Approach . OSHA should establish a team 
concept in rulemaking. A team for each individual 
rulemaking, consisting of representatives of all potentially 
interested components of OSHA and the Department of Labor 
{e.g., the Office of the Solicitor), should be appointed early in 
the rulemaking process to gather and analyze information, 
draft documents, respond to comments and advise the 
Assistant Secretary. Successfully functioning teams should be 
assigned to additional rulemakings where feasible. 

c. Options Review Process. OSHA should implement an 
"options review" process to provide policy guidance to teams 
working on designated health and safety standard rulemaking. 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

This process^ would provide that at least once in the early 
development of such rules (and perhaps again at later stages 
of rulemaking), the rulemaking team will identify and analyze 
regulatory options for consideration by a high-level agency 
policymaking official in an options review meeting. This 
meeting should produce discussion of alternative approaches 
for rulemaking and a narrowing of the range of options to be 
considered in the future; any decisions should be recorded in 
a memorandum that is available to the team. The options 
review meeting could be held in conjunction with the regular 
action tracking meetings recommended above (paragraph 2. a.). 



^The options review process herein recommended is currently 
employed successfully by the Environmental Protection Agency. 



OFFICIAL RECOMMENDATIONS 



RECOMMENDATION 87-2: 

FEDERAL PROTECTION OF PRIVATE SECTOR 

HEALTH AND SAFETY WHISTLEBLOWERS 



Private sector employees who make disclosures concerning 
health and safety matters pertaining to the workplace are protected 
against retaliatory actions by over a dozen federal laws. By 
common usage these employees, as well as others who make 
similar disclosures concerning fraud or other misconduct (but who 
are beyond the Conference's current study), ^ have become known 
as whistleblowers. Under current statutes, for example, nuclear 
power plant workers, miners, truckers, and farm laborers are 
specifically protected when acting as whistleblowers. Other 
workers may be covered under the more general protections 
granted by the Occupational Safety and Health Act (OSHA) or 
various environmental laws. 

The protection provided employees by the so-called 
whistleblower statutes under study serves the important public 
interest of helping ensure the health and safety of workers in the 
various regulated industries or activities, as well as that of the 
general public. The statutes are intended to create an environment 
in which an individual can bring a hazardous or unlawful situation 
to the attention of the public or the government without fear of 
personal reprisal. Such disclosures can be a valuable source of 
information especially where the public lacks the knowledge or 
access to information necessary to be fully informed on these 
important issues. 



^The Conference has limited its study to health and safety 
related disclosures because in this area a pattern of federal 
statutory protections has emerged with sufficient experience to 
allow a study. 



10 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

In its examination of the current federal statutory scheme 
designed to protect whistleblowers in the private sector, the 
Conference found that, as currently written, the various 
whistleblower statutes lack uniformity in a number of areas 
including the following: 

1. Investigative responsibility is assigned to numerous 
agencies, including the Department of the Interior and several 
within the Department of Labor (DOL), with little coordination 
among them. 

2. Adjudicatory responsibility is similarly divided. For 
example, while several statutes provide for adjudication by a DOL 
administrative law judge, others provide for decisions by different 
agencies or for trial in the district court. 

3. Judicial review likewise differs. Some statutes provide for 
review in the district court, some in the court of appeals. And for 
some, no review is available. 

4. Statutes of limitations for filing a complaint range from 30 
days to 180 days. 

5. Definitions of protected conduct differ according to 
statute. For example, protected disclosure may include any 
disclosure or may be more narrowly defined as disclosure to "the 
public," to the media, to the responsible agency, or to a union or 
employer. Protected conduct may or may not include refusals to 
work. 

6. In certain cases where the designated agency declines to 
proceed with the complaint (under either the OSHA or the 
Asbestos Hazard Emergency Response Act), the complaining 
employee is left without any further administrative or judicial 
review. 

As a result of these statutory incongruities, available 
procedures and protections may differ depending solely upon the 
industry to which an aggrieved employee belongs. For example, 
an employee seeking protection under the Clean Air Act (CAA) 
has 30 days in which to file a complaint, while an employee filing 
under provisions of the Migrant Seasonal and Agricultural Worker 
Protection Act (MSAWPA) has 180 days. And while both CAA 
and MSAWPA violations are investigated by the Wage and Hour 
Division of the Department of Labor, adjudication of CAA 
complaints is before a DOL administrative law judge, while 
MSAWPA complaints are adjudicated in the district courts. The 



OFFICIAL RECOMMENDATIONS 11 

Conference has concluded that this lack of uniformity does not 
appear to be reasoned, but most likely reflects the incremental 
enactment of the various statutes over a period of years. 

Accordingly, the Conference believes that omnibus 
whistleblower legislation providing for centralization of the 
investigative and adjudicative functions is needed. Because the 
Department of Labor now investigates and adjudicates such 
complaints under the majority of existing statutes, centralization 
in that Department is the logical choice. Although specialized 
expertise possessed by agencies responsible for the various 
regulatory programs covered by whistleblower provisions may be 
required in exceptional circumstances to resolve these disputes, the 
Conference believes that centralization is preferrable and that 
enforcement and adjudicative responsibilities should where 
feasible be assigned to the DOL. 

The Conference study also discussed areas of regulation where 
gaps in whistleblower protection exist. These include the aviation 
and aeronautics industries, vessel construction and operation, and 
manufacturing and production of food, drugs, medical devices or 
consumer products generally. Where Congress has judged it 
necessary to regulate an industry so as to ensure the safety of its 
workplace, products, services or the environment. Congress should 
consider whether it is appropriate that enforcement of the 
regulatory scheme be strengthened by providing whistleblower 
protection for the industry's employees who report statutory 
violations. 

The study also indicated that access to written decisional 
precedents in these cases needs to be improved. The Department 
of Labor's Office of Administrative Law Judges does not yet 
publish its decisions (although it has recently announced plans to 
do so), and a unified index for these decisions and those of other 
agency adjudicative bodies does not exist. Publication and 
indexing of existing case law should help narrow the issues for 
future adjudications, contribute to a sense of fairness in the 
adjudicatory process, and improve case management. In addition, 
the study found that, with certain exceptions, there is little 
interaction between the program agency and the 
investigating/adjudicating agency, thus diminishing the 
involvement of the lead program agencies. Procedures should be 
established by which program agencies provide assistance to 
investigative agencies, and adjudicatory agencies report decisions 
back to the program agency. 



12 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

Finally, the Conference notes that there is a growing amount 
of litigation in state courts concerning whistleblowers, but does 
not take a position on whether federal statutes do or should 
preempt state law in this field. (ACUS Recommendation 84-5, 
Preemption of State Regulation by Federal Agencies, recommends 
that Congress address foreseeable preemption issues, and advises 
regulatory agencies to be aware of situations where a conflict 
might arise.) 

With the increasing interest in these matters by Congress, the 
media and the general public, the Conference hopes that its study 
will provide a foundation for needed improvements. 



RECOMMENDATION 

I. In the interest of uniform treatment of private sector 
health and safety whistleblowers. Congress should enact omnibus 
legislation for the handling and resolution of whistleblowers' 
complaints. In enacting this legislation. Congress should review 
the categories of workers to which it is appropriate to extend 
whistleblower protection. As a general matter, the administration 
of this program should be centralized in the Department of Labor 
in furtherance of efficiency and harmony of results. If, however. 
Congress deems it necessary for a program agency to retain or 
receive investigative or adjudicative responsibility for 
whistleblower complaints. Congress should strive for uniformity in 
the substantive protections and procedures applicable to the 
separate program. ^ The omnibus and any other whistleblower 
legislation should include: 

(A) a uniform definition of protected conduct; 

(B) a uniform statute of limitations of not less than 180 days 
governing the filing of complaints; 

(C) a uniform provision for remedies; 



^The Conference does not intend to suggest that whistleblower 
protection provisions now administered by the Department of 
Labor be reassigned. Nor is this recommendation intended to 
affect the existing jurisdiction of the National Labor Relations 
Board to investigate and adjudicate allegations of unfair labor 
practices. 



OFFICIAL RECOMMENDATIONS 13 

(D) assignment of preliminary investigative responsibility to 
the Secretary of Labor^ for all private sector health and safety 
whistleblowing retaliation cases; 

(E) authorization for the Secretary of Labor to employ 
alternative means of resolving these disputes, with the consent 
of the parties (see ACUS Recommendation 86-3, Agencies' 
Use of Alternative Means of Dispute Resolution); 

(F) provision for an opportunity by any affected person to 
request an on-the-record APA hearing before a Department 
of Labor administrative law judge and for discretionary 
review by the Secretary of Labor, judicial review in the 
courts of appeals, and enforcement in the district courts; 

(G) a grant of subpoena power to the Secretary of Labor for 
whistleblowing investigations and hearings, with provision for 
judicial enforcement; and 

(H) a grant of rulemaking authority to the Secretary of Labor 
with respect to investigative and adjudicatory procedures, 
notice-posting requirements and mandatory coordination with 
other agencies. 

IL Whether or not Congress enacts omnibus whistleblowing 
legislation, the Secretary of Labor should: 

(A) promulgate rules of appellate procedure governing 
practice and procedure in connection with the Secretary's 
review of administrative law judge decisions in whistleblower 
cases; 

(B) transfer primary private sector health and safety 
whistleblowing investigative responsibility to a single entity 
within the Department of Labor, absent compelling reasons to 
the contrary; 

(C) develop, in consultation with the agencies responsible for 
the substantive regulatory programs, detailed written 
procedures for coordinating investigation, adjudication and 
follow-up in whistleblowing cases; and 



^All references to the Secretary of Labor in recommendations 
I(D)-I(H) encompass other appropriate agency heads in instances 
where Congress deems it necessary for a program agency to retain 
responsibility. 



14 



.OMINISTRATIVE CONFERENCE OF THE UNITED STATES 

(D) in accordance with the freedom of Inforrnation^Act,^5 
Sic. §552(a)(2)(A) -J^,^, ^^^g^tases, including those 

strprrhVL:rtSs.co^.n.e„dation. 



OFFICIAL RECOMMENDATIONS 15 



RECOMMENDATION 87-3: 

AGENCY HIRING OF PRIVATE ATTORNEYS 



In 1985 the Federal Government employed over 20,000 
lawyers in various positions. At the same time it spent millions of 
dollars to retain private attorneys to provide diverse legal services. 
The Federal Deposit Insurance Corporation (FDIC) and the 
Federal Home Loan Bank Board / Federal Savings and Loan 
Insurance Corporation (FHLBB) accounted for most of these 
expenditures. The attorney fees paid by the FDIC and the 
FHLBB have increased rapidly since 1982 and have been incurred 
primarily in their capacities as receivers or liquidators of failed 
financial institutions for which they have provided deposit 
insurance. In those cases, the legal fees and other expenses are 
borne by the estate of the failed bank. 

However, many other federal agencies, including government 
corporations, utilize the services of private attorneys — in some 
instances on a regular basis — and the fees are usually paid from 
appropriated funds. 

This recommendation results from a survey of the use of 
private attorneys by government agencies and consideration by the 
Conference of the process that should be employed in deciding 
whether to retain outside counsel, including the ethical concerns 
that may arise when outside counsel are retained. The 
recommendation applies to any agency that hires private attorneys 
to represent the agency or to provide it with legal advice, i.e., 
where an attorney-client relationship is established. The scope of 
the recommendation accordingly does not extend to instances 
where an agency hires an individual who may be an attorney but 
is clearly not being hired to act in that capacity. The scope may 
therefore exclude some persons who are hired to do independent 



16 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

research, arbitrators hired to decide personnel or other disputes, or 
persons hired to provide mediation or similar services in 
connection with negotiated rulemaking.^ 

Retention of private attorneys for litigation, where lawfully 
authorized, is within the scope of this recommendation. Congress 
has generally vested the power to litigate in the Department of 
Justice, although several agencies have been granted independent 
litigating authority by statute. Unless an agency is granted such 
authority, the consent of the Department of Justice is required for 
another agency to retain outside counsel for those purposes (5 
U.S.C. §3106). 

While some elements of the recommendation may state 
principles that are relevant to obtaining the services of other 
professionals, the Conference has studied only the retention of 
private attorneys. The focus of this recommendation on attorneys 
recognizes the role of the lawyer in implementing and enforcing 
government policy and the ethical requirements that are peculiarly 
applicable to attorneys. 

In the private sector, it is cost-effective both to employ a 
full-time legal staff and to contract out some legal assignments. 
Many corporations have focused attention on methods to ensure 
that the size of the in-house staff is optimal and that work is 
contracted out only when necessary or for certain categories of 
work. Corporations have developed guidelines, criteria, and 
procedures to control the cost and ensure the quality of legal 
services. 

In the public sector, concern for cost-effectiveness, a multi- 
faceted goal which does not look at the factor of price in 
isolation, is also clearly appropriate. The Conference has 
considered whether there should be a fixed cap on hourly fees to 
be paid to private attorneys hired by agencies, and has concluded 
that a government-wide limitation is inadvisable because it may 
prevent the government from obtaining high quality legal services. 
In many cases, the aggregate cost of legal services does not depend 
on hourly rates alone, and all relevant facts should be considered 
in determining the economic efficiency of a proposed contract for 
legal services. It may, however, be appropriate for individual 



^ The Administrative Conference has not studied the 
appointment of independent counsel under the Ethics in 
Government Act, 28 U.S.C. §§591-598, and this recommendation 
does not address the selection of such counsel. 



OFFICIAL RECOMMENDATIONS 17 

agencies to limit hourly rates for certain types of services, if such 
limits are set at realistic levels. In hiring private counsel, agencies 
can also take into consideration the attorney's willingness to 
negotiate fees, seeking the most competitive fees available, while 
securing the skills and efficiency required. 

Important additional considerations bear on the decision of 
the federal government to rely on outside counsel. An agency 
should be acutely aware of the need for control over the activities 
of outside counsel to ensure, among other things, that the 
constitutional vesting of governmental authority in "officers" of 
the United States is observed in fact. The need for close control 
may vary with the circumstances, but it must assume preeminent 
importance in litigation. 

In procuring the services of attorneys, agencies must also 
scrupulously avoid favoritism, or the appearance of favoritism, 
which can erode public confidence in the integrity and fairness of 
the government. Competitive procedures, whether mandated by 
procurement statutes or imposed as a matter of agency policy, will 
reduce the prospect or appearance of favoritism and result in 
higher quality legal services and savings in cost. Depending on 
the circumstances, the requisite procedures may range from a 
public solicitation of formal proposals to informal telephone 
requests to several sources for information relating to 
qualifications, availability, and fees. Appropriate competitive 
procedures should consider both cost and the more subjective 
elements of professional skill and efficiency. 

Attorneys performing work for the government must maintain 
the highest ethical standards. They should be particularly sensitive 
to questions of appearances and propriety. Neither the 
circumstances of their retention nor their conduct of their 
engagement should provide the slightest basis for loss of public 
confidence in the administration of justice or the integrity of the 
governmental process. 

The hiring of outside counsel may raise important questions 
regarding conflicts between the interests of the government and 
others, which federal criminal law (18 U.S.C. §§ 202 et seq.), 
ethics rules applicable to federal employees, and codes of 
professional responsibility seek to guard against. The principal 
ethical problem for outside attorneys involves simultaneous 
representation of the agency and, in a separate matter, a private 
party whose interests are adverse to the agency or the related 



18 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

interests of another agency. An important additional question is 
presented when an attorney or firm appears before an agency in a 
non-adversarial role on behalf of one client while simultaneously 
acting as attorney for the agency in a different matter. 

The government, like any client of a private attorney, may 
consent to representation of adverse interests by its outside 
counsel. Any such consent, however, should be fully informed. 
Accordingly, to afford full protection to the government and the 
public, every effort must be made to identify conflicts or potential 
conflicts before work is contracted out, and to assure that, during 
the course of the representation, previously unanticipated 
problems are immediately disclosed so that the agency may take 
appropriate action. 

Retainer agreements should identify the "client" with 
specificity and address questions related to existing or potential 
adverse representations. In many instances, only the agency that 
retains the private attorney will have an interest in the subject 
matter of the engagement, and in those instances that agency 
should ordinarily be considered the "client." This would have the 
effect of allowing outside counsel to appear before, or represent 
interests adverse to, other Executive Branch agencies in unrelated 
matters. Where broader interests of the government may be 
implicated, the agency retaining outside counsel will need to take 
those interests into account when drafting the retainer agreement. 

To assure that all of these concerns are taken into account, 
any agency that anticipates a need to hire private attorneys should 
prepare written public guidelines concerning when and how it will 
seek outside counsel. As an element of agency control and to 
avoid later misunderstandings, appropriate written instructions 
should be given to attorneys when they are retained. The FDIC, 
FHLBB, and the Department of Justice have developed documents 
for these purposes, and agencies drafting guidelines and 
instructions should refer to them as possible models. Agencies 
may also find useful models in the private sector for some 
elements of their guidelines. 

To respond to the concerns surrounding government use of 
outside counsel, agencies should prepare an annual public report 
listing basic information relating to legal service contracts 
awarded. 



OFFICIAL RECOMMENDATIONS 19 

RECOMMENDATION 

1. Scope of Recommendation 

This recommendation applies to any agency that hires private 
attorneys to represent the agency or to provide it with legal 
advice, i.e., where an attorney-client relationship is established. 

2. Use of In-House Government Attorneys 

(a) Government agencies should continue to obtain most of 
the legal services that they need from government attorneys. 

(b) When agencies cannot develop the necessary legal 
resources in-house, they should explore the possibility of utilizing 
the expertise found at other agencies of the government, on a 
temporary or short-term basis. The Office of Personnel 
Management should establish a procedure for sharing information 
among agencies on the kinds of legal resources available within 
the government. 

3. Guidelines for Hiring Outside Counsel 

Each agency that anticipates a need to hire private 
attorneys should prepare written public guidelines detailing: (a) 
the criteria for deciding whether or not to seek outside legal 
assistance, (b) the factors relevant to the choice of attorney or 
firm, (c) the procedures for procurement, (d) appropriate 
limitations on counsel's authority, (e) conflict of interest and other 
ethical considerations, (f) billing practices, and (g) procedures for 
review of fees. 

4. The Decision to Hire Outside Counsel 

When an agency is considering whether to hire outside 
counsel, the agency should first assure itself (a) that it is 
authorized by law to hire outside counsel for the particular matter, 
(b) that it can exercise sufficient control over the performance of 
the services to be obtained, and (c) that such employment is cost- 
effective. The price of the services should not, however, be the 
sole test of cost-effectiveness. Also of importance in assessing the 
benefit to be gained from the use of outside counsel are the 
quality of the services provided, the availability of necessary 



20 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

expertise within the agency, and the need for an outside 
independent perspective. 

5. Competition 

In obtaining outside counsel, the agency should employ 
appropriate competitive procedures to assure that the requisite 
quality of service is obtained at a reasonable price without the fact 
or appearance of favoritism. The Office of Federal Procurement 
Policy should review the existing provisions of the Federal 
Acquisition Regulation to ensure that legal services can be 
procured consistently with the objectives of this recommendation. 

6. Control of Performance 

The contracting agency should retain such control over the 
performance of outside counsel as is necessary to assure that the 
governmental and public interests at stake are fully protected. To 
facilitate control, the agency should at the outset provide the 
attorney with specific written instructions regarding the conduct 
of the professional representation. Control is particularly 
important where the outside counsel is engaged to represent an 
agency in litigation. 

7. Public Reports 

Each agency that hires outside counsel should prepare and 
maintain in the office of its chief legal officer an annual public 
report, listing for each occasion on which outside counsel has been 
retained: (a) the attorney or firm and the type of work involved, 
(b) the reasons for engaging outside counsel, (c) the competitive 
procedures used, if any, (d) the fee range or other basis for 
compensation, and (e) the actual fee paid. For cases involving 
small amounts, aggregate figures would be acceptable. 

8. Ethical Considerations 

(a) An agency should require outside counsel whom it 
plans to hire to disclose fully and in writing all existing or 
potential conflicts of interest. The disclosure should include all 
matters that the attorney's firm has pending before, or reasonably 
expects to come before, that agency. The agency should then 
decide whether to proceed with the hiring in light of the 



OFFICIAL RECOMMENDATIONS 2 1 

information provided. If the attorney-client privilege or other 
rules prevent outside counsel from making full disclosure to the 
agency, then the outside counsel should not be employed. The 
agency's agreements with outside counsel should specifically 
identify the types of professional employment that cannot be 
undertaken because of the attorney's service to the agency. 

(b) Federal agencies and such private attorneys as they 
retain should be mindful of the constraints imposed by statutes, 
regulations, executive orders, codes of professional conduct, and 
any applicable guidelines that pertain to conflict of interest and 
other potential ethical problems. Such provisions and guidelines 
should be explicitly identified and incorporated in the agency's 
contracts with outside counsel.^ 

(c) When an attorney retained by an agency is not a 
special government employee within the meaning of 18 U.S.C. 
§202(a), at a minimum those restrictions which apply to such 
employees should be adopted by the contract with the attorney 
unless they are clearly inappropriate. Such restrictions include 
rules of employee responsibilities and conduct contained, for 
example, in 5 CFR Part 735.^ 

(d) The Department of Justice and the Office of 
Government Ethics should provide guidance on the applicability 
of 18 U.S.C. §§203-208 to agency hiring of outside counsel. 
Subject to that guidance, agency guidelines should provide that, 
for purposes of disqualification based on prohibitions against 
simultaneous or sequential representation of opposing parties, 
different departments or independent agencies of the federal 
government should normally be considered to be different clients.^ 



^ The contract should indicate whether and to what extent 
outside counsel may take inconsistent positions on behalf of an 
agency and a private client. 

3 See 5 CFR §§ 735.301 -.306, which prescribe ethics and 
conduct rules for special government employees. See, particularly, 
5 CFR § 735.301, which advises agencies that appropriate ethics 
and conduct rules for regular employees, stated elsewhere in Part 
735, may also be made applicable by regulation to special 
government employees. 

^ This paragraph of the recommendation refers to "clients" 
solely for the purpose of determining disqualification. The 
implicit premise of the recommendation is that the Executive 
Branch is a unitary entity whose interests and legal positions are 



22 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

The guidelines should also provide that, if more than one agency 
has a common interest in the matter, then the definition of "client" 
should include any such agency or agencies. The guidelines 
should also make clear that all lawyers in the firm, including all 
branch offices of the firm, are subject to the applicable 
restrictions on simultaneous or sequential representation, and that 
these restrictions apply not merely to litigation, but to all matters 
in which an attorney-client relationship has been established.^ 

(e) The guidelines should also address the varying 
circumstances in which an attorney may represent other clients in 
matters involving the agency. The guidelines should identify those 
situations that should be avoided. 

(f) If a private attorney represents the same agency 
frequently, then their relationship should be considered as a 
continuing one. In such a situation, neither the attorney nor the 
attorney's firm should agree to represent another client in a matter 
involving the client agency without the agency's explicit consent, 
even if, at that time, the attorney is not representing or advising 
the agency on a specific matter. 

9. Limitations on Hourlv Rates 

No government-wide limitation on hourly rates should be 
established for hiring of private counsel. It may be appropriate 
for agencies to set a fixed cap on hourly rates that they pay to 
private attorneys for routine legal tasks; a higher fee cap may be 
appropriate for unusual or complex legal work. Such limits, if 
adopted, should be set at realistic levels, in line with fees typically 
charged for similar services in the same locale, so that agencies 
hiring outside counsel will be able to obtain the needed degree of 
expertise. 



determined by the President or his delegates, including the 
Attorney General. 

^ The Department of Justice should consider, in accordance 
with Recommendation 84-5, 1 CFR §305.84-5, whether to issue a 
regulation that explicitly preempts any state rule of attorney 
practice that is in conflict with its guidance. 



OFFICIAL RECOMMENDATIONS 23 



RECOMMENDATION 87-4: 
USER FEES 



There is widespread interest in Congress and the Executive 
Branch in instituting user fees in certain government programs. 
Although a general user fee statute (31 U.S.C. §9701) dates to 
1952, recent studies, including a report of the President's Private 
Sector Survey on Cost Control, have urged expanded application 
of such fees. In light of these developments, the Administrative 
Conference has undertaken a study of the user fee concept in 
cooperation with the Office of Management and Budget and other 
federal agencies. 

The decision to institute a user fee for a particular service or 
good is a policy decision for Congress and the Executive Branch 
to determine, and the Conference does not address this subject. 
Nevertheless, when Congress or an agency establishes a user fee, 
that action should be based upon general principles that guide the 
setting and implementation of fees. The Conference, therefore, in 
this recommendation seeks to provide a set of such basic 
principles. 

In this recommendation "user fee" means a price charged 
identifiable individuals or entities by the federal government for a 
service or good which the government controls. The 

recommendation addresses only the institution and implementation 
of user fees to promote the efficient and fair allocation of 
government services and goods. Accordingly, the Conference does 
not address the imposition of charges intended primarily to 
enhance federal revenues or primarily to encourage or discourage 
behavior unrelated to resource allocation. 



24 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

RECOMMENDATION 

A. Benefits 

A government service for which a user fee is charged 
should directly benefit fee payers. A service provided by the 
government as a condition to the pursuit of commercial or 
other activity {e.g., inspections) may properly be regarded as a 
benefit to the fee payer where it confers an advantage on the 
fee payer or lessens the fee payer's imposition of costs or 
risks on others or on society as a whole. 

B. Basic Considerations for Establishing Fee Levels 

1. Market and Cost Considerations . 

When Congress or an agency establishes a user fee for a 
service or good provided by an agency, the fee should rest on 
market factors where possible. In the absence of a reliable 
market price, the fee normally should cover the agency's 
costs, including all related processing costs and that portion of 
other agency costs properly allocable to the service or good 
provided (such as anticipated capital replacement or repair 
costs). 

2. Other Considerations . 

a. When criteria other than those set forth in paragraph 
1 above (e.g., national policy objectives, program goals or 
fairness) influence the decision to establish fees, the costs to 
be recovered, or the granting of waivers or reductions, 
agencies should explain the criteria used and the rationale for 
their selection. 

b. Where third parties or the general public benefit 
significantly from a governmental service, user fees need not 
be set to recover fully the cost of providing that service. 
Agencies should consider the practicability of allocating costs 
between fee payers and others when determining the 
proportion of service costs to be recovered by user fees (as 
opposed to alternative financing mechanisms). 

c. The fee level may be set without regard to the 
distribution of benefits among the customers, employees and 
owners of the fee payers. However, selection of the point of 
collection should take into account the costs of administration. 



OFFICIAL RECOMMENDATIONS 25 



C. Disposition of Fee Receipts 

The Conference takes no position on whether fee receipts 
should be deposited in the Treasury general fund or 
earmarked to a specific fund. In either event, agencies 
administering programs that collect fees should be provided 
with funds sufficient to provide adequate service. In enacting 
a user fee, Congress should specifically address the issue of 
how the proceeds are to be used. 

D. Implementation of Principles 

Congress in revising or enacting user fee legislation, and 
the Office of Management and Budget in providing 
implementation guidance and other information on user fees 
to agencies, should incorporate the principles set out in this 
recommendation. Agencies should review their user fee 
statutes and existing programs to determine whether changes 
are necessary to implement these principles. 



26 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



RECOMMENDATION 87-5: 
ASSURING THE FAIRNESS AND 
ACCEPTABIU7Y OF ARBITRATION 
IN FEDERAL PROGRAMS 



The Administrative Conference has recommended that 
agencies employ alternative means of dispute resolution (ADR) in 
federal programs.^ ADR techniques for rulemaking include 
structured negotiation and mediation; for adjudication, they also 
include arbitration, factfinding and minitrials.^ The bulk of these 
techniques do not alter the placement of policymaking authority 
within the agencies, and therefore pose few of the legal and policy 
concerns of binding arbitration, which typically involves the use 
of outside arbitrators authorized to make decisions binding upon 
the government. If an arbitrator decides a claim by or against the 
government, public money will be involved. Arbitration decisions 
concerning other issues in administering a federal program, such 
as the resolution of enforcement cases or disputes between the 
agency and its employees, affect administration of the program. 
In programs where the agency's role is to resolve disputes between 
private parties, arbitrated disputes will relate to the purposes of 
the program, for example by resolving disputes related to program 
administration. In addition, the Constitution requires that 



^ See generally Recommendation 86-3, Agencies' Use of 
Alternative Means of Dispute Resolution, 1 CFR § 305.86-3. 

^ See Recommendation 82-2, Resolving Disputes Under 
Federal Grant Programs, 1 CFR § 305.82-2; Recommendations 82- 
4 and 85-5, Procedures for Negotiating Proposed Regulations, 1 
CFR §§ 305.82-4 and .85-5; and Recommendation 84-4, 
Negotiated Cleanup of Hazardous Waste Sites Under CERCLA, 1 
CFR § 305.84-4. 



OFFICIAL RECOMMENDATIONS 27 

significant duties pursuant to public law must be performed by 
Officers of the United States and their employees. These concerns 
can be met if Congress, in authorizing the use of arbitration, or 
the agency, when adopting arbitration, confines it to appropriate 
issues and provides for the agency's supervision of arbitration. 

Existing law authorizes resort to arbitration in a variety of 
different contexts, including claims by and against the 
government, disputes between private individuals that are related 
to program administration, and labor relations issues between the 
government and its employees. Recommendation 86-3 calls on 
Congress to act to authorize agency officials to choose arbitration 
to resolve many additional disputes. 

This recommendation contains procedural advice for Congress, 
and occasionally agencies, in an effort to ensure the fairness and 
acceptability of arbitration in federal programs. The criteria are 
necessarily general, and the appropriateness of particular arbitral 
procedures must be judged in the context of the particular 
functions they serve. Agencies are generally in the best position 
to assess the need for informal and expeditious process, and to 
weigh that need against considerations of accuracy, satisfaction, 
and fairness. While the Conference encourages granting agency 
officials broad "on-the-spot" discretion to use arbitration, it 
recognizes the need for preliminary steps to meet concerns that 
the process provide some executive oversight, preserve judicial 
functions and ensure quality decisions, and maintain legality and 
fairness. This recommendation sets forth procedural criteria to aid 
Congress and agencies in taking these first steps. 

RECOMMENDATION 

1. In all cases, congressional authorization for voluntary 
binding arbitration, whether performed by government employees 
or private arbitrators, should ensure that Congress has made, or 
the agency will make, an explicit judgment that arbitration is 
appropriate for the case or class of cases in question. Criteria for 
determining whether arbitration is appropriate include the 
following: 

(a) Cases subject to arbitration should involve questions of 

fact or the application of well-established norms, even if 

statutory, rather than precedential issues or application of 
fundamental legal norms that are evolving. 



28 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

(b) In determining whether to employ arbitration, Congress or 
the agency should consider the nature and weight of the private 
interests involved, the nature and weight of the government's 
interests, and the tradeoffs between the costs and benefits of 
arbitration and those of more formal processes. A heavy 
adjudicative caseload and the particularization of decisions in 
accord with previously declared guidelines justify the use of 
private arbitrators or other non-government persons . 

2. Congress should assess the desirability of mandatory 
arbitration in light of the extent to which a person's participation 
in the affiliated program is voluntary.^ For example, participation 
in an entitlement program is more likely to reflect need than 
consent, and should not be regarded as consent to arbitration of 
eligibility. 

3. Congressional authorization for arbitration should ensure 
that: 

(a) The agency has an opportunity to choose whether to resort 
to arbitration,^ and to review the overall composition of any 
arbitral pool to ensure its neutrality and, where appropriate, 
specialized competence. Agencies should either employ arbitral 
pools and procedures that are well-established, such as those of 
the AAA, or should develop rosters or pools to meet their special 
needs;^ 

(b) Parties to an arbitrable controversy, including an agency, 
have a role in the selection of the arbitrator, consistent with 
preserving the neutrality of the decider, for example by striking 
names from a list; and 

(c) Arbitral awards are reviewed by agencies or by courts 
under the criteria of the U.S. Arbitration Act, which authorizes 
review of the facial validity of the award and the integrity of the 
process. Agencies can be authorized ordinarily to review 
individual awards with no specific provision for judicial review.^ 



^ See Recommendation 86-3, Jfl^ 7-9, Agencies' Use of 
Alternative Means of Dispute Resolution^ for other limitations on 
the use of mandatory arbitration. 

^ See Id. 

^ See Recommendation 86-8, ^ 1(c), Acquiring the Services of 
Neutrals for Alternative Means of Dispute Resolution. 

^ See Recommendation 86-3, ^ 4, Agencies' Use of Alternative 
Means of Dispute Resolution. 



OFFICIAL RECOMMENDATIONS 29 

If SO, no Special provision need be made for judicial review of 
individual awards. Judicial review of the overall structure and 
fairness of the arbitration program should suffice. In the rare 
case in which a serious constitutional issue attends an individual 
arbitration, such as an allegation of a taking, existing law provides 
avenues for relief. 

4. Agencies should ensure that the standard for arbitral 
decisions is reasonably specific, by promulgating administrative 
standards where statutes do not sufficiently guide arbitral decision. 
A substantial justice standard for arbitral awards should be used 
only when explicitly approved by the agency, because of the 
resulting difficulties of administrative or judicial review of the 
outcome. The sufficiency of other standards should be judged by 
whether the parties can consent meaningfully to arbitration and 
can prepare their cases, whether the arbitrators can produce 
reasonably consistent decisions, and whether reviewing entities can 
judge the facial validity of awards. 

5. The following considerations should govern the ongoing 
administration of arbitral programs: 

(a) Agencies should be careful to preserve the objectivity of 
arbitration by avoiding instructions or forms of oversight that 
would threaten to undermine the arbitrator's neutrality in a 
particular case. Plainly, however, generally applicable indicators 
of pertinent governmental policy, such as interpretive regulations, 
are meant to be controlling, whether proceedings be in the form 
of arbitration or agency adjudication. 

(b) Authority to determine the arbitrability of particular 
disputes can be placed in the courts, as under the U.S. Arbitration 
Act, or in another neutral third party, such as the administering 
agency where arbitration concerns private parties, or in an agency 
other than one which is a party to arbitration. 

(c) Interpretive rulemaking can alter the standards for future 
arbitration when monitoring of awards reveals outcomes 
inconsistent with the agency's expectations in employing 
arbitration. 



30 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



RECOMMENDATION 87-6: 
STATE-LEVEL DETERMINATIONS IN 
SOCIAL SECURITY DISABILITY CASES 



In Fiscal Year 1986, nearly two and one half million 
individuals applied for disability benefits under two federal 
programs administered by the Social Security Administration: 
Retirement, Survivors, Disability and Health Insurance (RSDHI), 
and Supplemental Security Income (SSI). Payments made annually 
to their seven million beneficiaries totalled twenty-nine billion 
dollars during that period. Certain aspects of this enormous 
benefit program have recently been subject to close scrutiny to 
determine whether greater efficiency is possible. 

In order to be eligible for either program, a claimant must 
meet medical and other criteria. The RSDHI program operates as 
an insurance plan. A worker qualifies by earning a sufficient 
amount of wages for a required period of time. By contrast, the 
SSI program is a welfare program whose non-medical criteria are 
met by a demonstration of need. 

If a claimant meets the criteria for either plan, he or she must 
then meet the medical criteria for disability in order to establish 
eligibility for benefits. The basic statutory test is identical for 
both RSDHI and SSI: 

inability to engage in any substantial 
gainful activity by reason of any 
medically determinable physical or 
mental impairment which can be 
expected to result in death or which 
has lasted or can be expected to last 
for a continuous period of not less 



OFFICIAL RECOMMENDATIONS 31 

than 12 months. 42 U.S.C. §§423 
(d)(1)(A); 1382c(a)(3)(A). [See also 
43 U.S.C. §423(d)(2)(A) which 
liberalizes the work requirement 
somewhat.] 

Claimants begin the application process by filing an 
application at a Social Security Administration office. If a 
claimant meets the non-medical criteria, the file is then forwarded 
to a federally-funded and SSA-regulated state Disability 
Determination Service (DDS) for a determination as to disability. 
A two-person team consisting of a "disability examiner" and 
medical consultant (a physician employed by DDS) reviews the 
medical evidence and reaches its decision. The claimant is not 
present at any time during the process. 

A claimant who is dissatisfied with the initial determination 
(about 60% are denials) has 60 days in which to seek a 
reconsideration. Reconsiderations are also performed at the state 
DDS level, and are essentially a repeat of the initial determination 
process, but with different personnel acting as decisionmakers. 
The record may be supplemented at this time, but as with the 
initial determination process, the claimant does not appear. In FY 
1986, about 40% of denied claimants (totalling 380,000) sought 
reconsideration and about 17% of those received favorable re- 
determinations. 

Further review is available at the ALJ and Appeals Council 
stages. See Recommendation 87-7 for a description of these later 
review stages. 

Several areas pertaining to the disability determination, 
hearing and review process have been subject to criticism. First, 
the current system, with its four tiers of successive review, often 
results in the replacement of one decisionmaker's determination 
with that of the next, but without necessarily improving the 
quality of any of the actual decisions. Second, because there is 
little cost to filing an administrative appeal (and everything to 
gain in doing so), there is correspondingly little incentive for a 
claimant to accept any unfavorable determination as final. 
Accordingly, there is a wide stream of cases all the way to the end 
of the process. Moreover, claimants whose cases are decided 
without a personal appearance before the decisionmaker (as is the 
case in three of the four review stages) frequently feel dissatisfied 
with the process, that they have not received their "day in court." 



32 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

In addition, courts, members of Congress, and the system's 
clients have all indicated that their confidence in the system has 
deteriorated to the point that its integrity has suffered. The 
public's faith in this institution is essential to its success in the 
long run. 

In efforts to improve the administration of the state-level 
determination process, the stage at which the caseload stream is 
the widest. Congress and SSA have engaged in some modifications 
of the system as well as some experimental procedures. By 1983, 
a large increase in appeals from terminations of benefits in 
continuing disability review (CDR) cases had begun to flood the 
system. In such cases SSA performs reviews on existing 
beneficiaries to determine whether the disability still exists. If the 
determination is negative, a notice of termination is sent, 
triggering the above-described review process. Congress reacted 
to this by passing P.L. 97-455, which gave the option to claimants 
of an "evidentiary hearing" at the reconsideration stage in all CDR 
cases. Although a moratorium in CDR cases slowed the institution 
of this procedure, it is now in place and specially trained hearing 
officers are conducting these relatively formal proceedings. 

In 1984 (P.L. 98-460), Congress mandated demonstration 
projects in selected DDS offices to try a one-step proceeding, 
allowing a personal interview but eliminating the reconsideration 
step. In five states, the interview was to be used in initial 
determinations, and in five other states it was to be used in place 
of the evidentiary hearing in CDR cases. These demonstration 
projects are currently underway, and results are limited. Although 
preliminary, the experience with evidentiary hearings and the 
demonstration projects with personal interviews give rise to the 
following conclusions: 

— face-to-face procedures are more satisfactory to 
claimants than are paper reviews, resulting in claimants feeling 
that they received a fair hearing; 

-- face-to-face procedures are helpful to decisionmakers, 
in many instances providing them with evidence not ascertainable 
from the paper file. 

If the final results of the demonstration projects are consistent 
with these initial findings, it is probable that by implementing 
some kind of a face-to-face proceeding at the state level, awards 
of benefits that ultimately would be made later in the system will 
be made at the outset. This will have the effect of decreasing the 



OFFICIAL RECOMMENDATIONS 33 

caseload at later levels, both for ALJs and the Appeals Council, 
and for federal courts. Overall costs to the system would thereby 
be reduced as well. 

At the request of the Social Security Administration, the 
Administrative Conference has undertaken a preliminary review of 
the disability determination process at the state level. The 
Conference makes the following Recommendations, based on that 
study. 

RECOMMENDATION 

The Conference supports Congressional and Social Security 
Administration (SSA) efforts to improve the procedure by which 
initial and reconsidered disability determinations are made by state 
Disability Determination Service (DDS) offices. Although existing 
experience with use of evidentiary hearings at reconsideration is 
sparse, and experiments using a single-step determination (after a 
personal interview, but without reconsideration) are at an early 
stage, some preliminary suggestions can be made to SSA: 

1. Experiments and demonstration projects concerning use 
of face-to-face procedures at the initial determination stage 
should be continued and encouraged. SSA should conduct 
thorough and careful evaluations of both the evidentiary hearing 
procedure now used in continuing disability review (CDR) cases 
and the personal interviews now being tried in selected state 
demonstration projects and should make prompt reports to 
Congress. 

2. Full implementation of evidentiary hearings (for other 
than CDR cases) or personal interviews (either at the initial or 
reconsideration stage) should await the final report on the current 
experiments by the Department of Health and Human Services 
(HHS). 

3. HHS's reports concerning the use of face-to-face 
procedures should include consideration of the cost of full 
implementation of evidentiary hearings or personal interviews at 
the initial or reconsideration stage. Should cost considerations 
militate against full implementation of such hearings or interviews, 
SSA should consider the feasibility and fairness of permitting 
some kind of a hearing or interview on a discretionary basis 
subject to appropriate published guidelines where either the 
claimant's file, type of medical condition or the opinion of the 



34 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

examiner indicates that such a procedure would be of significant 
assistance to the ultimate determination. 

4. In analyzing the results of the procedures and the 
ongoing experiments at the DDS level, SSA should develop 
accurate measures of efficiency and associated record-keeping 
requirements. Specifically, such measures of processing time 
should take into account post-interview time expended waiting for 
third party responses to requests for additional case development. 
Any measures of efficiency adopted by SSA should not serve to 
discourage the use of comprehensive interviews. 

5. In analyzing the procedures and ongoing experiments 
(and in any future analyses), SSA should review the reasonableness 
of variations between DDS offices in their award rates and other 
aspects of case handling, in light of state-by-state variables that 
can affect the disability determination process. 

6. SSA should proceed with caution before taking the 
position that face-to-face hearings or interviews at the DDS level 
would be an adequate substitute for the opportunity for an 
adjudicatory hearing before a SSA administrative law judge (ALJ). 
Rather, such modifications to the DDS process should be seen as a 
possible way of reducing the number of appeals to the later stages 
of the process. 

7. Close scrutiny should be given to any legislative or 
other proposals to Completely eliminate the reconsideration stage, 
taking into account the impact of that step on overall processing 
costs, and on the caseload at the ALJ stage. Any such proposals 
to convert the two DDS stages into a single stage should consider 
the need to allow some type of a face-to-face proceeding at that 
stage, as provided for in the demonstration projects. 

8. Before instituting evidentiary hearings (for other than 
CDR cases) or personal interviews in all DDS offices, SSA should 
consider (a) decentralization of DDS offices into decisional units 
to minimize travel costs and (b) the need to select and train a 
sufficient number of personnel qualified to conduct such hearings 
or interviews. 

9. The record in disability appeals should not be closed 
until completion of the ALJ stage -- that point in the process at 
which claimants now are more likely to be represented by 
attorneys or other advocates. 



OFFICIAL RECOMMENDATIONS 35 



10. SSA should conduct a study of: (a) the reference 
sources of claimants (e.g,. referrals from state welfare agencies, 
private insurance carriers, etc.) to determine whether such 
referrals are a source of excessive numbers of claims that are later 
determined to be unmeritorious, (b) the nature of "dropouts," 
claimants who fail to pursue their appeal rights, to determine why 
this occurs, and (c) the number of claimants who reapply in lieu 
of appealing, and the reasons therefor. 



36 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



RECOMMENDATION 87-7: 

A NEW ROLE FOR THE 

SOCIAL SECURITY APPEALS COUNCIL 



The Social Security disability system is described generally in 
Recommendation 87-6 which focuses on the initial determination 
process at the state-level Disability Determination Service (DDS) 
offices. This Recommendation addresses the later stages of review 
by the Social Security Administration (SSA).^ 

The first stage of review by federal decisionmakers is the 
third step in the process for disability claimants. Claimants 
disappointed after state-level initial and reconsideration 
determinations may then demand a hearing before an 
administrative law judge (ALJ) employed by the Social Security 
Administration. About 65% of such claimants do so. This is the 
first time in the process (except in certain demonstration projects 
or cases involving the termination of benefits) that a claimant has 
a face-to-face encounter with the decisionmaker. The hearings 
are de novo, and generally follow Administrative Procedure Act 
guidelines. Approximately 50% of appeals taken to an ALJ 
hearing result in the award of benefits. 

The fourth, and final, level of administrative review is to the 
Social Security Appeals Council. This twenty member body, 
created by regulation, and chaired by the Associate Commissioner 
for Hearings and Appeals, disposes of a staggering 50,000 cases 
annually. (About 40% of claimants who lose at the ALJ stage 
appeal.) In addition to appeals from ALJ decisions, the Appeals 



The Conference has previously addressed elements of the Social Security appeals 
process (focusing primarily on the ALJ hearing stage) in Recommendation 78-2, 
Procedures for Determining Social Security Disability Claims, 1 CFR §305.78-2. 



OFFICIAL RECOMMENDATIONS 37 

Council reviews, on its "own motion," selected cases where there 
has been a grant of benefits. The Appeals Council relies on 
analysts in its companion unit, the Office of Appeals Operations 
(OAO), to screen cases and make recommendations concerning 
disposition of the cases. Council members hold the same salary 
grade level as SSA ALJs. They perform purely a paper review on 
cases that are forwarded to them by OAO and assigned to them 
individually based on the geographical origin of the case. The 
Appeals Council acts on each appeal, although in most cases the 
request for review is summarily denied or dismissed. Because of 
the demands on each member (up to 500 cases per member per 
month), a typical case is likely to receive less than 15 minutes of 
paper review by the member. The Council almost never sits in 
panels or conducts oral arguments. In recent years, approximately 
5% of the cases reviewed result in reversals (i.e., awards of 
benefits), and another 7 to 15% are remanded to the ALJ. 

After exhaustion of state and federal administrative remedies, 
a claimant may seek judicial review in the federal district court. 
In the years 1981 to 1986 the number of new SSA disability cases 
filed in the courts ranged from 9,000 to 26,000 per year. 

In past years, the Appeals Council has to some extent played 
a policy-relevant role. Yet, as its caseload increased, it was by 
necessity limited to a narrow case correction function. 
Accordingly, its members had little time to devote to policy 
matters. Recently, the Appeals Council has come under attack 
from many fronts, including Congress, claimants and their 
representatives, and academicians, who have questioned both the 
Appeals Council's usefulness as an additional step in the 
adjudicative chain and the resulting delays caused to claimants 
who wish to proceed to court. 

Critics have complained that the rate of reversals is so low 
that it fails to compensate for the additional delay caused to 
claimants who wish to seek judicial review. The Conference's 
study noted that because its members are so driven by the 
"tyranny of the caseload," it has failed to take advantage of its 
unique position as the final administrative review body — one that 
sees a diverse number of disability cases, and accordingly, can 
detect emerging problems, and identify new issues to be resolved 
and policies to be developed. Thus, any capabilities it should have 
in promoting consistency of lower-level decisionmaking, and 
policy integrity throughout the system, are thwarted, and it is left 
with little more than a case-handling role. 



38 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

The Social Security Administration requested the 
Administrative Conference to study and analyze the operation of 
the Appeals Council. 

Serious consideration was given to recommending outright 
abolition of the Appeals Council. This view was premised on the 
Appeals Council's present inability to do little more than add one 
more layer to the already-lengthy review bureaucracy. (This 
criticism was not intended as a denigration of Appeals Council 
members, whom the study found to be competent, dedicated, and 
cooperative.) Before recommending such a drastic, and 
irreversible step, however, the Conference felt that an attempt 
should be made to use the unique perspective and expertise of the 
Appeals Council to help correct the existing problem. The 
Conference believes that fundamental changes are needed to 
reduce the Council's caseload to a more manageable volume so that 
individual cases can be given more attention and the Council can 
be a significant contributor to agency policymaking. Accordingly, 
to implement a systems-reform function for the Appeals Council, 
the Conference makes the following Recommendations for 
modification of its structure, purpose and operations. 

While the recommendation anticipates a reduced volume of 
cases for the Appeals Council, the Conference believes that 
improved fact-finding will result from the changes in initial 
determinations (see Recommendation 87-6), and that this will 
compensate for diminished factual review at the Appeals Council 
stage. 

RECOMMENDATION 

1. The Social Security Administration (SSA) should, as soon 
as feasible, restructure the Appeals Council in a fashion that 
redirects the institution's goals and operation from an exclusive 
focus on processing the stream of individual cases and toward an 
emphasis on improved organizational effectiveness. To that end, 
the Appeals Council should be provided the authority to reduce 
significantly its caseload and also be given, as its principal 
mandate, the responsibility to recommend and, where appropriate, 
develop and implement adjudicatory principles and decisional 
standards for the disability determination process. In particular, 
SSA should adopt the following structural reforms to improve the 
Appeals Council's ability to perform its new function. 



OFFICIAL RECOMMENDATIONS 39 

a. Focus on System Improvements. SSA should 
make clear that the primary function of the 
Appeals Council is to focus on adjudicatory 
principles and decisional standards concerning 
disability law and procedures and transmit 
advice thereon to SSA policymakers and 
guidance to lower-level decisionmakers. Thus 
the Appeals Council should advise and assist SSA 
policymakers and decisionmakers by: 

(1) conducting independent studies of 
the agency's cases and procedures, 
and providing appropriate advice 
and recommendations to SSA 
policymakers; and 

(2) providing appropriate guidance to 
agency adjudicators (primarily ALJs, 
but conceivably DDS hearing 
officers in some cases) by: (a) 
issuing, after coordination with other 
SSA policymakers, interpretive 
"minutes" on questions of 
adjudicatory principles and 
procedures, and (b) articulating the 
proper handling of specific issues in 
case review opinions to be given 
precedential significance. The 
minutes and opinions should be 
consistent with the Commissioner's 
Social Security Rulings. Such 
guidance papers should be 
distributed throughout the system, 
made publicly available, and 
indexed. 

b. Control of its Caseload. In order to fulfill its 
responsibility to develop, and to encourage 
utilization of, sound decisional principles and 
practices throughout SSA, the Appeals Council 
must be empowered to exercise its review 
sparingly, so that it may concentrate its attention 
on types of cases identified in advance by the 



40 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

Appeals Council. These types of cases might 
include a small sample of random cases or 
categories identified by the Secretary of Health 
and Human Services from time to time. To that 
end, the Secretary should direct the Appeals 
Council to design a new review process, subject 
to the Secretary's approval, that would continue 
to be part of the available administrative remedy 
for a claimant dissatisfied with an administrative 
law judge's (ALJ's) initial decision, but that 
would enable the Appeals Council to deny a 
petition for review if the issues it sought to raise 
are deemed inappropriate for the Appeals 
Council's attention. If a petition for review is 
denied, the ALJ's decision should be deemed to 
be final agency action. 

c. Improved Review of Individual Cases. The 
Appeals Council, given a reduced caseload, 
should upgrade its handling of individual cases. 
In particular the Council should: 

(1) work more collaboratively, including 
as appropriate, considering cases en 
banc or in panels; 

(2) encourage claimant's representatives 
to submit briefs (including amicus 
briefs) on selected issues and 
evaluate the benefits of encouraging 
oral arguments in appropriate cases 
(utilizing existing authority to 
reimburse participants as necessary); 

(3) write more elaborate opinions, 
providing better reasoning and legal 
analysis and relying less on 
boilerplate and verbatim recitation 
of records; 



OFFICIAL RECOMMENDATIONS 41 



(4) avoid substitution of judgment on 
ALJ factual determinations;^ 

(5) significantly reduce the time needed 
to initiate or deny review of cases 
and issue a final decision in most 
cases within 90 days of accepting 
review, unless an extension or delay 
request by a claimant is granted for 
good cause; and 

(6) specify that once the period for 
accepting review has passed, ALJ 
decisions should be deemed to be 
final agency action, and should be 
subject to reopening by the Appeals 
Council only in accordance with 
existing standards. 

d. Enhancement of Status of Appeals Council. SSA 
should improve the status of the Appeals 
Council and insure high caliber appointment by: 

(1) reducing the size of the Council so 
that the Council can meet and act 
more collegially; 

(2) upgrading the salary level of 
members so that it is one level above 
SSA ALJs; 

(3) providing the members, by 
regulation, with the same civil 
service protections as accorded to 
career service personnel and by 
providing ALJs who agree to serve 
on the Council with assurances that 
they will receive reappointment to 



^In conjunction with this reliance on the record below, the Appeals Council 
should not permit new evidence to be introduced without good cause, although 
motions to remand to the hearing stage should be permitted. See Recommendation 
78-2, ^ (c)(1); 1 CFR §305.78-2(c)(l). 



42 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

their former position upon 
completion of service; and 

(4) establishing merit selection criteria 
for appointment to the Appeals 
Council, giving preference to prior 
experience as an ALJ. 

e. Enhancement of Support Systems. SSA should 
improve the support system provided to its 
Appeals Council by reorganizing the Office of 
Appeals Operations, providing law clerks to 
assist members, and updating production and 
communication systems. 

f. Enhance the Appeals Council's Visibility. The 
Appeals Council should enhance its visibility 
both inside and outside the agency by reinstating 
the "visiting ALJ" program,^ instituting exchange 
programs with other SSA components, seeking 
publication of precedent by a recognized 
reporter service, and encouraging other outreach 
and bar-related activities. 



2. If the reconstituted Appeals Council does not result in 
improved policy development or case-handling performance within 
a certain number of years (to be determined by Congress and 
SSA), serious consideration should be given to abolishing it. 



The visiting ALJ program allowed for one-month temporary duty by an ALJ on 
the Appeals Council. SSA should consider longer intra-agency details in the future. 



43 



RECOMMENDATION 87-8: 

NATIONAL COVERAGE DETERMINATIONS 

UNDER THE MEDICARE PROGRAM 



In 1986, the Administrative Conference undertook a broad 
overview of the administrative procedures employed by the federal 
government (primarily the Health Care Financing Administration 
within the Department of Health and Human Services) in 
administering and deciding appeals under the Medicare program. 
Recommendation 86-5, Medicare Appeals^ 1 C.F.R. § 305.86-5, 
urged the Health Care Financing Administration (HCFA) to 
improve its system for publishing, updating, and making accessible 
the standards, guidelines and procedures used in making coverage 
and payment determinations in the Medicare program. The 
recommendation also suggested some improvements in the 
administrative appeals system and listed some fruitful areas for 
further research. 

This recommendation builds on Recommendation 86-5 by 
focusing on a major aspect of the Medicare program: the making 
of policy concerning what aspects of medical care are covered by, 
and therefore reimbursable by, the Medicare program. 
Implementation determinations must be made every day on a case- 
by-case basis by Medicare contractors (peer review organizations, 
carriers and fiscal intermediaries such as Blue Cross). In most of 
these cases the coverage question involves a determination of 
whether an item or service was medically necessary for the 
individual or was furnished in the appropriate setting. Typically, 
the Medicare contractor has considerable discretion in ruling on 
individual claims although that discretion is bounded by policy 
pronouncements made in various ways by HCFA. If an individual 
claim for reimbursement is denied by the Medicare contractor, the 



44 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

claimant (whether a beneficiary or provider of care) may appeal 
the denial of claims over $500 to an administrative law judge and 
then further appeal to a federal district court for claims over 
$1,000. Recent legislative restrictions, however, have further 
limited claimants' opportunities to challenge coverage 
determinations in court or before an ALJ, and it is difficult for 
equipment manufacturers to participate in or challenge national 
coverage determinations even though their financial stakes can be 
significant. 

HCFA makes coverage policy in a number of ways.^ In some 
cases Medicare contractors refer questions about new medical 
procedures or technologies to the HCFA regional or national office 
which makes an informal judgment for application in that case. 
In other cases HCFA makes "national coverage determinations" 
which apply in all future similar cases. Since the beginning of the 
program HCFA (and its predecessor agency) have made about 200 
such national determinations on medical procedures and 
technologies, and the number made each year is growing. 
However, in its recent Federal Register notice, HCFA stated that a 
"national coverage determination" included any coverage policy 
published in any HCFA manual. Such rulings are published either 
in the Federal Register or the Medicare Coverage Issues Manual , 
although many other coverage policies are published in other 
manuals that are less widely available, and are not designated as 
national coverage determinations. 

Although the making of these national coverage 
determinations constitutes rulemaking, HCFA does not use a 
notice-and-comment procedure in most cases. HCFA's Bureau of 
Eligibility, Reimbursement and Coverage normally simply makes 
rulings on coverage determinations referred from contractors 
unless it determines that a medical question is presented. In such 
cases the question is referred to the in-house HCFA Physicians 
Panel which meets in private to decide on these referrals. The 
Physicians Panel may recommend a further referral to the Public 
Health Service's Office of Health Technology Assessment (OHTA). 
Most referrals to OHTA are in the form of informal inquiries, 
without public notice, after which OHTA simply conducts in- 
house investigations and reports back to HCFA. Requests for full 



HCFA's procedures for making national coverage policy had not been published 
until April 29, 1987 when under court order, the agency issued a notice in the 
Federal Register describing its process (though not its criteria) and sought 
comments. 



OFFICIAL RECOMMENDATIONS 45 

OHTA assessments, on the other hand, usually result in a Federal 
Register notice and widespread consultation with affected groups. 
In either event, OHTA makes a recommendation to HCFA which 
then makes and publishes the determination. Only then are the 
OHTA findings disclosed. 

Except in these "formal OHTA assessments," beneficiaries, 
providers and manufacturers have no opportunity to participate in 
this policymaking process. Nor are the criteria used by HCFA 
and the Medicare contractors in making this policy identified or 
published. Moreover, once the policy is announced, opportunities 
to challenge it have been severely circumscribed by the 1986 
Omnibus Budget Reconciliation Act. (Pub. L. 99-509, § 9341; 42 
U.S.C.A. § 1395ff(b)(3) (1987)). The Act provides that 
administrative law judges may not review national coverage 
determinations in administrative appeals. It also limits judicial 
review by providing that national coverage determinations may not 
be held unlawful on the grounds of violation of the APA or lack 
of opportunity for public comment, and further provides that 
reviewing courts cannot overturn a denial based on coverage 
determinations without first remanding to HHS for 
supplementation of the record. 

In Recommendation 86-5, the Conference recommended that 
HHS "introduce more openness and regularity" into these important 
determinations through "(1) [d]evelopment of published decisional 
criteria; (2) providing for notice and inviting comments in such 
cases, both in HCFA's decisionmaking process and in the process 
by which [OHTA] supplies recommendations to HCFA; and (3) 
providing for internal administrative review or reconsideration of 
such decisions." The Conference commends the recent HCFA 
notice and request for comments on its procedures as a good first 
step, but urges that further steps be taken to open up the 
decisional criteria and procedure to public participation and also 
urges Congress to consider modifying the statutory limitations on 
the review of the reasonableness and the procedural fairness of 
such national coverage determinations. 

RECOMMENDATION 

1. Publication of Procedures and Criteria Through Rulemaking 

The Health Care Financing Administration (HCFA) should 
continue its recent steps toward describing and seeking comments 
upon the procedures it uses for making national coverage 



46 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



determinations in the Medicare program. HCFA should follow its 
recent informational notice with a notice-and-comment 
rulemaking proceeding setting forth the procedures as well as all 
decisional criteria for making national coverage determinations. 

2. Elements of the National Coverage Determination Process 

HCFA's proposed and final rule on national coverage 
determinations procedures and criteria should: 

(a) specify the procedure by which HCFA 
selects coverage questions that will be 
considered in this process; 

(b) identify and describe what categories of 
coverage issues will be left to the decision 
of Medicare contractors and HCFA 
regional offices; and address the extent to 
which, and the manner in which, 
significant coverage determinations made 
by contractors and regional offices can be 
identified and disseminated more widely; 

(c) provide for the opportunity for public 
comment prior to promulgation (or if that 
is infeasible, an opportunity for comment 
after adoption)^ of all national coverage 
policies whether or not the determination 
is referred to the HCFA Physicians Panel 
or to the Office of Health Technology 
Assessment; 

(d) establish internal management controls to 
facilitate the timely processing of requests 
from Medicare contractors and petitions 
filed by beneficiaries, providers and other 
affected persons for initiation of a national 
coverage determination;^ 



^he agency should then re-evaluate the policy after receiving comments. See 

Acus Recommendation 76-5, Interpretive Rules of General Applicability 
and Statements of General Policy, i C.F.R. § 305.76-5. 

^See ACUS Recommendation 86-6, Petitions for Rulemaking, % 2(d), 1 
C.F.R. § 305.86-6 (2)(d). 



OFFICIAL RECOMMENDATIONS 47 



(e) develop techniques to encourage the HCFA 
Physicians Panel, the Office of Health 
Technology Assessment, and the Public 
Health Service to respond expeditiously to 
referrals; and 

(f) identify all publications in which coverage 
policy will be published, and the method 
by which those publications will be made 
reasonably accessible to beneficiaries and 
other affected groups. 

3. Use of Negotiated Rulemaking 

In addition to providing for a national coverage 
decisionmaking process that accords beneficiaries, providers, 
equipment manufacturers and other interested parties an 
opportunity to have input into the formulation of specific national 
coverage determinations, HCFA should in appropriate cases also 
consider use of elements of a negotiated rulemaking procedure/ 

4. Modification of Recent Legislative Restrictions on 
Administrative and Judicial Review 

Congress should reconsider and, at minimum, clarify its 
intent^ with regard to the recent restrictions it placed upon 
administrative and judicial review of national coverage 
determinations. In so doing. Congress should: 

(a) consider whether to clarify the restriction 
against administrative law judge review of 
national coverage determinations [42 
U.S.C.A. 

§ 1395ff(b)(3)(A)] by (i) making clear that 
administrative law judges may review the 
application of such determinations to 
claimants and (ii) specifying that this 
limitation only applies to those national 



"^See ACUS Recommendations 82-4 and 85-5, Procedures for Negotiating 

Proposed Regulations, i c.f.r. §§ 305.82-4, 85-5. 

In particular, Congress should, for the purposes of these restrictions, clarify its 
definition of "national coverage determination" and explain whether or not policies 
other than those concerning medical procedures and technologies and published in the 

Federal Register or Medicare Coverage Issues Manual are included. 



48 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



coverage determinations that are properly 
published and indexed, and that have been 
issued after an adequate opportunity for 
public comment. 

(b) Consider repealing 42 U.S.C.A. § 
1395ff (b)(3)(B), which restricts judicial 
review of procedures used in promulgating 
national coverage determinations. 

(c) eliminate the provision [42 U.S.C.A. § 
1395ff (b)(3)(C)] that limits reviewing 
courts' ability to review the validity of a 
national coverage determination applied in 
a particular case without first remanding 
the case to the agency for supplementation 
of the record. 



i 



49 



RECOMMENDATION 87-9: 
DISPUTE PROCEDURES IN 
FEDERAL DEBT COLLECTION 



The Debt Collection Act of 1982 (DCA)i was passed in 
response to concern over the vast amount of delinquent debt owed 
to the federal government and the haphazard collection record of 
many agencies. While Congress appears to have been concerned 
mainly with various mass loan and loan guarantee programs, most 
conspicuously the student loan programs, the effects of the Act 
extend well beyond such programs. The Act included about a 
dozen provisions designed to facilitate collection, in many 
instances by removing obstacles created by other federal statutes 
and case law. It also contained provisions authorizing the use of 
collection agencies,^ charging of interest and penalty fees, 
reporting of delinquent debtors to credit bureaus, and use of IRS 
information to locate debtors. 

While the purpose of the DCA was to enhance collection 
efforts. Congress was also concerned about the due process rigjits 
of debtors against whom the government was to take action. In 
adopting provisions for collection by offset against salaries and 
other money owed by the federal government. Congress provided 
for pre-offset opportunities for debtors to contest the relevant 
debts. Agencies implementing the offset authority under the DCA 
have used advantageously the latitude afforded under the DCA to 
develop a range of procedures. The Act provides two basic forms 



^ 5 U.S.C. §§ 552a(b) and (m), 5514; 18 U.S.C. 2415(i); 31 U.S.C. §§ 3701, 
3711(f), 3716-3719; Pub. L. No. 97-365. 

The Act was later amended to authorize, on an experimental basis, contracting 
with private attorneys to bring collection actions. 



50 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



of debt collection by offset- -"salary" offset and "administrative" 
offset- -with differing procedures for each. A proceeding with an 
independent decisionmaker and adversary factfinding has been 
required in most salary offsets, and by a few agencies elsewhere. 
A range of less formal models, in which collection offices simply 
reconsider their decisions based on debtor-supplied data and other 
available information, has been employed in administrative offsets, 
i.e., those not involving the salaries of government employees. 

The framework for offset dispute resolution established by 
the DCA, Federal Claims Collection Standards (issued jointly by 
the General Accounting Office and Department of Justice), and 
the Office of Personnel Management's Pay Administration 
Standards make possible reasonably adequate evaluation of 
disputes without seriously impeding collection of general 
government debts. No major changes are needed. However, the 
procedural requirements of the DCA and the 0PM Standards are 
overly burdensome when applied to routine pay adjustments. 
Moreover, some advice to agencies on implementing their dispute 
processes, reducing uncertainty over the relationship of the DCA 
to other statutes (e.g., the Contract Disputes Act) affecting 
government claims, and some other issues raised by the DCA's 
attempt to integrate due process with effective debt collection, 
may be useful as agencies make greater use of their authority to 
collect debts. 



RECOMMENDATION 



1. AGENCY PROCEDURES UNDER THE DEBT 

COLLECTION ACT 

a. In connection with salary offsets, the General Accounting 
Office and Department of Justice should amend the Federal 
Claims Collection Standards^ and the Office of Personnel 
Management should amend the Pay Administration Standards^ so 
as to reduce the formality of procedures for handling routine 
adjustments of pay and travel allowances. Informal forms of 
review, including review on a "class" basis where a single error has 



^4CFRPart8 101-105 
^5 CFR §550.1101-. 1106 



OFFICIAL RECOMMENDATIONS 51 

a broad effect, should suffice in most cases involving computer 
errors, simple miscalculations, and similar kinds of mistakes or 
adjustments. 

b. In connection with administrative offset, informal types of 
intra-agency review procedures appear consistent with the 
purposes of the DC A, and can provide a satisfactory balance 
between protecting debtors and assuring effective collection.^ 
However, agencies should ensure, where possible, that the 
reviewer does not participate in the initial claims determination, 
particularly where a dispute involves substantive issues that go 
beyond allegations of mechanical or other simple kinds of error. 

c. Procedures with an independent decisionmaker and 
adversarial factfinding may occasionally be desirable in 
administrative offset cases where a debtor raises relatively 
complex legal or factual issues or where assessments of credibility 
are required. However, these procedures may be needlessly 
burdensome for agencies even in some procedurally complex 
situations, such as where other proceedings with respect to the 
claim may be occurring and preservation of the government's 
flexibility is necessary. Taking into account these factors, 
agencies should consider whether to make use of such procedures 
even though apparently not required to do so by the DCA. 

d. Agencies should take steps to enhance the awareness of, 
and access to, offset dispute procedures by debtors with limited 
ability to present a case in writing or otherwise cope with offset 
procedures. These steps may appropriately be confined to 
measures that are inexpensive and do not significantly interfere 
with efficient collection activity. Examples might include follow- 
up telephone calls to debtors with vague or inadequate written 
submissions, review of agency records to see if they support 
debtor allegations, and use of telephone hearings. In connection 
with salary offset disputes, these steps should be taken by 
independent hearing officials (or persons associated with them) as 
well as by collection staff. Experience should be monitored to see 



This recommendation should not be read as detracting from the procedures for 
resolving disputes relating to federal grants that were recommended by the 
Conference in Recommendation 82-2. 1 CFR § 305.82-2. Where administrative offset 
issues are addressed at the same time as post -award grant disputes, the proceedings 
should include a notice, an impartial decisionmaker, an opportunity to present 
significant evidence and argument, and a written decision, as called for in 
Recommendation 82-2. 



52 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

if measures to enhance accessibility of the dispute process in fact 
result in more debtors asserting meritorious defenses. 

e. Some techniques that have been employed and should be 
considered to keep offset procedures expeditious and efficient are: 

(i) Adoption of objective criteria to assist in making 
decisions respecting hardship and other potentially 
nebulous matters; and 



(ii) Avoiding the need for oral hearings on issues of 
credibility by treating debtors' factual allegations as proven 
where 

(a) circumstances do not give rise to 
significant doubts as to reliability and 

(b) either the amount in dispute is small or 
the issue of credibility is not critical to the 
disputed facts. 



2. CLARIFYING THE ACTS RELATION TO OFFSETS IN 
GOVERNMENT CONTRACTS 

a. Congress should clarify the applicability of the DCA 
provision on administrative offset (31 U.S.C. § 3716) to make clear 
that government acquisition contracts are not covered, but that the 
government retains the right of offset to collect debts in such 
cases. At the same time. Congress should ensure that, under 
relevant agency procedures, before a contracting officer's decision 
can serve as the basis for offset under any other authority, 

(i) The contractor receives notice of the proposed 
government claims and the basis for them and an informal 
opportunity to present its position, and 

(ii) the decision is informally reviewed by an agency official 
not directly connected with administering the contract. 

b. The withholding of funds in connection with a single 
contract, where final payment has not occurred, should continue 
to be governed by existing law. 



53 



RECOMMENDATION 87-10: 
REGUUVTION BY THE OCCUPATIONAL 
SAFETY AND HEALTH ADMINISTRATION 



This is the second of two recommendations adopted by the 
Administrative Conference this year on Occupational Safety and 
Health Administration (OSHA) regulation. In its first 

recommendation,^ the Conference recommended that OSHA make 
specific changes in its management of rulemaking and its process 
for establishing regulatory priorities. At that time, the Conference 
accepted OSHA's request that it continue to study possible broader 
changes to its regulatory process, including alternatives to the 
traditional hazard-by-hazard^ regulation. 

Having completed this study, the Conference recommends 
more extensive procedural changes to assist OSHA in fulfilling its 
statutory mandate of assuring adequate safeguards for American 
workers. OSHA has promulgated a small number of safety and 
health standards each year using the traditional hazard-by-hazard 
approach.^ But the task before the agency is overwhelming 
existing processes. OSHA is responsible for regulating dangerous 
chemicals included in the tens of thousands of chemicals in the 
nation's workplaces, to which approximately one thousand new 
chemicals are added each year. OSHA also is charged with 
enforcing safety standards in American workplaces. 



ACUS Recommendation 87-1, Priority Setting and Management of Rulemaking 
by the Occupational Safety and Health Administration, 52 F.R. 23629 (1987). 

As used in this recommendation, the term "hazard" without further modification 
refers to both safety hazards and health hazards {e.g., exposure to toxic substances). 

During its first sixteen years, OSHA promulgated eighteen new health standards 
(setting permissible exposure limitations for twenty- three substances) and twenty-six 
safety standards. 



54 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

The Conference, therefore, recommends that OSHA undertake 
rulemaking to develop generic or class standards, including 
updating the 1971 national consensus standards, where appropriate. 
In addition, the Conference recommends a regulatory planning 
process and use of other procedures to supplement its traditional 
rulemaking process. It is important to add, however, that the 
Conference has found no alternative regulatory approach that is 
always appropriate or better than the traditional regulation. 
Rather, this recommendation identifies factors or conditions that 
favor the use of the various alternative regulatory approaches. 

One uncertainty clouding OSHA's use of generic or class 
rulemaking is whether OSHA can obtain the information it needs 
to meet the burden of proof required by the Occupational Safety 
and Health Act ("Act") for safety and health standards. As 
interpreted by the courts, OSHA is required to show that a hazard 
poses a "significant risk" to workers and, if so, to set the standard 
at a level that assures "to the extent feasible" that no employee will 
suffer "material impairment of health or functional capacity." If 
OSHA is unable to obtain the information needed for its risk and 
feasibility determinations, the use of generic rulemaking, as well 
as other internal reforms, is not likely to lead to a more efficient 
regulatory process. 

Experience with generic or class rulemaking may show that 
statutory changes are required to enable OSHA to adopt this 
procedure. The Conference, therefore, recommends amendments 
of the Occupational Safety and Health Act that Congress should 
consider if OSHA's administrative efforts to promulgate generic 
standards are not successful. One recommendation is that 
Congress provide an expedited procedure for updating the 1971 
Table Z national consensus standards. The Conference also 
recommends that Congress reconsider the Act's regulatory standard 
in light of its judicial construction and agency experience. 
Specifically, Congress should consider giving OSHA greater 
flexibility in fashioning remedies to correspond to the level of 
workplace risks. Congress, for example, could allow OSHA to 
regulate some hazards to a level of "best available technology," as 
the Environmental Protection Agency is allowed to do under 
various statutes. The Conference also recommends that the Act's 
rigid statutory deadlines and detailed restrictions on advisory 
committees be removed. A final recommendation is that Congress 
replace the Act's "substantial evidence" judicial review standard 
with a standard that reflects the nature of rulemaking decisions. 



OFFICIAL RECOMMENDATIONS 55 

RECOMMENDATION 



1 . Updating the 1971 Consensus Standards . The 

Occupational Safety and Health Administration, as an interim step, 
should continue to update the Table Z national consensus 
standards adopted in 1971 if updating can be accomplished by an 
expedited rulemaking procedure (e.g., including more concise 
preambles) appropriate to the nature of the revised Table. OSHA 
should update the 1971 standards on a generic basis (i.e., include 
multiple standards in one proceeding) when consensus 
recommendations are available, which are generally accepted by 
employers and workers in the affected industries, and when the 
new standards can be evaluated on the basis of risk and feasibility 
information reasonably available to the agency. This interim step 
should not interfere with OSHA's continuing responsibility to 
promulgate and modify safety and health standards. 



2. Rulemaking to Develop Generic or Class Standards . 
OSHA should expand its use of generic or class standards 
regulating multiple health and safety hazards where appropriate 
and consistent with its legal mandate. 

a. Industry-wide standards. OSHA should consider the 
following criteria when deciding if industry-wide generic 
standards will be more efficient and effective than hazard- 
by-hazard regulation: (1) whether hazards are in an industry 
that can be discretely defined, (2) whether most of the 
hazards to be regulated are unique to the industry to be 
regulated, (3) whether the hazards in the industry are 
relatively static over time, and (4) whether industry-wide 
rulemaking will impose lower aggregate compliance costs on 
the regulated industry than rulemaking on a hazard-by-hazard 
basis. 

b. Multi-hazard standards. OSHA should consider 
adopting multi-hazard standards whenever scientific 
knowledge and policy judgment make it possible to use the 
same or a similar risk assessment for a group of included 
hazards and the feasibility analysis can be simplified or 
expedited because standard abatement techniques are 
available. 



56 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



c. Generic work-practice standards. OSHA should 
consider adopting work-practice standards {e.g., training, 
worker protective devices, and engineering controls) 
applicable to multiple industries when the following factors 
are present: (1) a similar hazard exists in the industries that 
can be regulated by one rule, (2) the same or a similar work- 
practice requirement would be effective in all such industries, 
and (3) generic risk and feasibility findings are appropriate. 



3. Regulatory Alternatives and Procedures . In addition to 
generic or class rulemaking, OSHA should adopt the following 
rulemaking alternatives and procedures as appropriate: 

a. Performance standards. OSHA should generally use 
performance standards (/.^., standards that prescribe the 
regulatory result to be achieved) whenever they will provide 
equivalent protection as that provided by design standards 
{i.e., standards that prescribe a specific technology or precise 
procedure for compliance). In deciding which type of 
standard to employ, OSHA also should consider whether the 
standard can be readily understood and monitored and 
whether it may lower industry compliance costs. 

b. Information disclosure. OSHA should continue to 
approve information disclosure requirements as a complement 
to regulatory standards. 

c. Negotiated rulemaking. OSHA should continue to 
experiment with negotiated rulemaking procedures;"* in so 
doing it should develop methods (such as specific deadlines 
for termination of any negotiation) to assure that the 
negotiated rulemaking procedure is discontinued in a timely 
manner if it is not working. 

d. Advisory committees. OSHA should reactivate 
rulemaking advisory committees for difficult scientific and 
technological questions. The scientific orientation in such 
committees should be assured by including a high proportion 
of independent and government scientists on committees. In 
addition, questions assigned to such committees should be 
limited so that current statutory deadlines can be met. {See 



The Conference has previously provided guidance to agencies on the use of 
negotiated rulemaking, SCC ACUS Recommendations 82-4 and 85-5, Procedures for 
Negotiating Proposed Regulations, 1 CFR §§ 305.82-4, 85-5 (1987). 



OFFICIAL RECOMMENDATIONS 57 



also section 5.c. below.) OSHA also should require its 
advisory committees to submit written reports which include 
the committee's evaluation of relevant data. 

e. Advance notice of proposed rulemaking. OSHA should 
not routinely use advance notices of proposed rulemaking as 
an information-gathering technique; it should use an advance 
notice when information that is not available through other 
vehicles is likely to be forthcoming in response to such notice. 

f. Interagency coordination. OSHA should continue to 
cooperate with other health and safety agencies and OMB to 
coordinate where possible the testing, evaluation, and 
regulation of potential health hazards.^ 



4. Developing a Regulatory Plan . OSHA should periodically 
develop and review regulatory plans which specify how the agency 
intends to regulate hazards on its priority lists, including 
identification of potential candidates for generic rulemaking, 
negotiated rulemaking, use of advisory committees and other 
regulatory approaches or techniques. To avoid duplication, OSHA 
should coordinate its regulatory plans with any submission 
required by the Office of Management and Budget. 

a. Regulatory planning committee. OSHA should assign 
the initial responsibility for developing regulatory plans to an 
internal regulatory planning committee that includes 
representatives from all appropriate department and agency 
offices. 

b. Public availability. OSHA should make a synopsis of 
the results of regulatory planning committee meetings 
available to the public after the Assistant Secretary has had an 
opportunity to review any proposed committee 
recommendations. In addition, OSHA should periodically 
provide an opportunity for public comment on its regulatory 
plan. 



5. Statutory Change . OSHA should include in its periodic 
reports to Congress the status of its implementation of the 



^The need for interagency coordination of federal regulation of cancer-causing 
chemicals is addressed in Part II of ACUS Recommendation 82-5, 1 CFR § 305.82-6 
(1987). 



58 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

administrative changes recommended in paragraphs 1 through 4 
above. If statutory impediments or judicial decisions inhibit 
efficient and effective regulation, Congress should consider 
amendments of the Occupational Safety and Health Act, including 
the following: 

a. Consensus standards update. Congress should amend 
the Act to provide an expedited procedure for the generic 
updating of the permissible exposure levels in Table Z, 
incorporated into OSHA standards at 29 CFR § 1910.1000. 
This procedure, while not including all the steps specified in 
29 U.S.C. § 655(b) as construed by the courts, should afford 
an opportunity for public comment. 

b. Regulatory standard. Congress should amend the Act 
to give OSHA greater flexibility in regulating workplace 
hazards. Following its experience in environmental 
regulation,^ Congress should consider establishing a 
classification scheme that would vary OSHA's burden of 
justification for safety and health standards to correspond to 
the degree of risk posed by a hazard and the level of control 
to be required by the OSHA standard. 

c. Rulemaking deadlines. Congress should amend the 
Act to replace the existing statutory deadlines for various 
stages of rulemaking with a provision requiring OSHA to set 
timetables or deadlines for each rulemaking proceeding.'' 

d. Advisory committees. Congress should amend 29 
U.S.C. § 656(b) to replace the detailed restrictions on 
standard-setting advisory committee membership with a 
general provision authorizing use of advisory committees 
subject only to the Federal Advisory Committee Act, 5 U.S.C. 
App. 



^Under the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-1376 (1982), 
and the Clean Air Act, 42 U.S.C. §§ 7401-7642 (1982), Congress has authorized 
different classes of regulation, specified an initial designation, established a lower 
burden of proof for regulation that is less strict, and has indicated that the agency is 
to receive deference for its final choice of which class of regulation to apply. A similar 
approach is used for Food and Drug Administration regulation under the Medical 
Devices Amendments to the Food, Drug, and Cosmetic Act, 21 U.S..C. §§ 360c-360k 
(1982). 

^ See ACUS Recommendation 78-3, Time Limits on Agency Actions, 1 CFR § 
305.78-3 (1987). 



OFFICIAL RECOMMENDATIONS 59 



e. Judicial review standard. Congress should amend the 
standard of judicial review for OSHA safety and health 
standards, 29 U.S.C. § 655(f), so that agency policy judgments 
are subject to the traditional standard of "arbitrariness" and 
the factual premises on which they are based are subject to a 
standard of "substantial support in the administrative record 
viewed as a whole."^ 



^he recommended standard follows ACUS Recommendation 74-4, 1 CFR § 
305.74-4, *fl9] 3, 4 (1987). It is also consistent with the Restatement of the Scope of 
Review Doctrine adopted by the Administrative Law Section of the American Bar 
Association. 



60 



RECOMMENDATION 87-11: 
ALTERNATIVES FOR RESOLVING 
GOVERNMENT CONTRACT DISPUTES 



Government procurement is a major component of federal 
spending. It now comprises an important part of the nation's 
economy. The recent expansion of government contracting has 
been matched, perhaps exceeded, by the rise in disputes between 
agencies and contractors. Increasingly, management problems are 
handed over to lawyers and accountants to be resolved 
contentiously by criteria that are often only marginally relevant. 
Causal factors include increased regulatory requirements; reduced 
authority of agency contracting officers; a greater willingness 
among contractors to resort to litigation; an expanding government 
contracts bar; broadened notions of due process; enhanced 
congressional oversight that can discourage settlement; and the 
establishment (or expansion) of offices of inspector general and 
intra-agency audit offices. 

Most knowledgeable government officials, contractors and 
attorneys agree that government contract appeals have become too 
onerous, too expensive and too time- consuming. Despite 
Congress' goals in enacting the Contract Disputes Act of 1978 
("CDA") to provide an expeditious alternative to court litigation 
and to encourage negotiated settlements, most appeals are not now 
resolved either promptly or inexpensively. Agency boards of 
contract appeals ("BCAs"), originally intended to be alternatives to 
courts, have become "judicialized," with depositions, discovery and 
lengthy opinions common. 



OFFICIAL RECOMMENDATIONS 61 

The system established by the CDA^ begins with the 
contracting officer ("CO"), an agency official whose function is to 
enter into and administer government contracts. Any claim arising 
out of a contract is to be presented to the CO. The CO has a dual 
role: to represent the government as a party to the contract, but 
also to make initial decisions on claims subject to certain 
procedural safeguards. If the dispute is not amicably resolved, the 
CDA requires the CO to issue a brief written decision stating his 
or her reasons. A contractor dissatisfied with a CO's decision may 
appeal either to an agency BCA or directly to the U.S. Claims 
Court. The proceedings become considerably more formal at this 
stage. While agency boards and their rules are hardly uniform, 
they typically involve written notice of appeal and complaint, 
discovery, depositions, subpoenas, hearings that result in 
transcripts, and board decisions signed by three-member panels. 
"Accelerated" procedures are available for claims under $50,000, 
and a more streamlined "expedited" process for claims under 
$10,000. 

A variety of remedies have been prescribed for the growing 
cost, delay, and other problems encountered in federal contract 
disputes. They range from marginal revisions of the boards (e.g., 
enlargement of BCA resources), to increased professionalization of 
COs, to structural changes in the ways agencies do business. 
While a number of these proposals have merit, the Conference is 
focusing herein only on the cluster of methods that have come to 
be known as alternative means of dispute resolution ("ADR").^ 
These methods are consistent with the CDA's goals, and have 
proven efficient and fair. They serve to involve decisionmakers, 
rather than their representatives, in the conflict resolution process. 
ADR methods have regularly aided private parties to resolve 
disputes similar to those decided by BCAs. 

Several ADR methods are particularly appropriate to resolving 
many government contract claims, and a few agencies have begun 
to experiment successfully with them. The Conference urges all 
major contracting agencies, and persons who deal with them, to 
explore seriously the potential uses for ADR and to begin creating 



^41 U.S. Code §§ 601-613; 5 U.S.C. § 5108 (c)(3); 28 U.S.C. §§ 1346(a)(2), 
149(a)(2), 2401(a), 2414, 2510, 2517; 31 U.S.C. § 1304(a)(3)(C) (1982); enacted 
November 1, 1978 by Pub. L. No. 95-563, 92 Stat. 2383. 

^hese include arbitration, factfinding, minitrial, mediation, facilitation, 
convening, conciliation, and negotiation. 



62 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

an atmosphere in which these methods can be readily employed.^ 
This recommendation offers advice on the application of 
commonly used ADR methods to post-award contract disputes 
before agency boards of contract appeals. 

RECOMMENDATION 

1. AGENCIES' ADR POLICIES AND PRACTICES 

a. Congress should amend the Contract Disputes Act 
(1) to make indisputably clear that the contractor and the 
government may agree to use arbitration^ or any other mutually 
agreeable ADR procedures for resolving claims relating to agency 
contracts and (2) to encourage COs to make all reasonable efforts 
to resolve a claim or dispute consensually, either prior to issuance 
of a CO decision or subsequently. 

b. The President should promulgate an Executive Order 
that encourages voluntary use of ADR procedures to resolve 
contract disputes at the CO and BCA levels. 

c. The Office of Federal Procurement Policy should 
issue a policy statement, and the Civilian Agency Acquisition 
Council and the Defense Acquisition Regulatory Council should 
amend the Federal Acquisition Regulation,^ to encourage COs, 
before issuing a decision likely to be unacceptable to a claimant, 
to recommend to the parties and their representatives that they 
seek to explore the use of ADR to resolve their differences. The 



The Conference has repeatedly recommended that agencies employ ADR. 
Recommendation 86-3 calls on agencies to make greater use of mediation, 
negotiation, minitrials, and other "ADR" methods to reduce the delay and 
contentiousness accompanying many agency decisions. Agencies' Use of 

Alternative Means of Dispute Resolution, 1 CFR § 305.86-3. The 

Conference has previously called for using mediation, negotiations, informal 
conferences and similar innovations to decide certain kinds of disputes more 

effectively. E.g., Procedures for Negotiating Proposed Regulations, i 
CFR §§ 305.82-4, 85-5; Negotiated Cleanup of Hazardous Waste Sites 
Under CERCLA, i CFR § 305.84-4; Resolving Disputes under Federal 
Grant Programs, i cfr § 305.82-2. 

Such arbitration authority should be consistent with the procedures and 
safeguards set forth in Conference Recommendations 86-3, id, and 87-5, Assuring 

the Fairness and Acceptability of Arbitration in Federal Programs, 

1 CFR § 305.87-5. 
^48 CFR Part 7 



OFFICIAL RECOMMENDATIONS 63 



policy statement and FAR should also encourage agencies to adopt 
policies or rules concerning ADR, as set forth below. 

d. Agencies should adopt policies encouraging 
voluntary use of ADR in contract disputes. The policies should 
place the responsibility for implementing ADR with contracting 
officers, government counsel, and BCA judges. These policies 
should make clear that superior agency officials will support 
reasonable settlements reached by means of properly selected ADR 
methods. The policy should also provide for systematic review of 
all cases for susceptibility to ADR, specify who has authority to 
approve the selection of a case for ADR, and set forth guidance 
on documenting the negotiation processes or justifying settlements. 
Agencies should also consider, as a matter of general policy, 
offering certain forms of ADR to contractors in specified kinds of 
disputes (e.g., those involving less than a stated maximum 
amount). 

e. Agencies should adopt regulations that (1) authorize 
agency officers to make use of ADR in contract disputes; (2) 
make provisions for automatically alerting the parties, both at the 
CO level and as soon as an appeal is filed, that one or more ADR 
methods is available; (3) authorize BCA judges to encourage ADR 
use and to require the attendance, at any conference held for the 
purposes of proposing or implementing ADR, of at least one 
representative of each party who has authority to negotiate 
concerning the resolution of all issues in controversy; (4) briefly 
describe the alternative procedures; (5) authorize the parties to 
agree to vary any procedural rule in their case; and (6) insure 
confidentiality of communications made during use of ADR 
methods. 

f . Agency boards of contract appeals should: 

(1) Routinely include in docketing notices an 
announcement indicating the availability of ADR, describing the 
available methods, and telling how interested persons can follow 
up to explore potential ADR use in their cases. 

(2) Amend their procedural rules to provide 
explicitly for conferences to consider the possible use of ADR in 
each case to help dispose of any or all issues in dispute. 

g. Presiding and chief judges at BCAs should regularly 
review their dockets and suggest use of a settlement judge, 
mediation, minitrial, or other ADR methods whenever appropriate. 



64 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

2. EMPLOYING ALTERNATIVES IN CONTRACT 

DISPUTES 

a. Finding Neutrals^ 

(1) To facilitate the parties' choice of appropriate 
neutrals, the Administrative Conference, in consultation with the 
Federal Mediation and Conciliation Service and other 
knowledgeable groups, should establish a central roster of minitrial 
advisors and other neutrals available to help resolve government 
contract disputes. Use of the list, however, should not be 
mandatory. The list should include, at a minimum: 

(a) All persons who have experience as 
neutral advisors in government contracts minitrials; 

(b) Any BCA judges and administrative 
law judges who wish to serve as neutral advisors for disputes 
within their own agency, another agency, or both. (Some 
safeguards to ensure interagency reciprocity and to assure no other 
involvement with the dispute may be necessary); and 

(c) Any retired federal or state court 
judges, BCA judges, and administrative law judges who are 
interested. 

(2) Each BCA should take steps to make available 
its judges to serve as settlement judges, minitrial advisors, or other 
neutrals to help resolve disputes before other agencies' BCAs. 



b. Minitrials 

(1) Agencies should develop and distribute 
minitrial guidelines that include sections dealing with criteria for 
identifying appropriate cases; contents of minitrial agreements; 
rules as to any discovery; roles of the participants, including any 
neutral; authority of the principals; exchange of position papers, 
audit reports, quantum submissions, and other documents and 
exhibits; procedure and format of the hearing; possible time limit 
on the negotiations; fees and expenses; and procedures for 



^In Recommendation 86-8, Acquiring the Services of "Neutrals" for 
Alternative Means of Dispute Resolution, 1 CFR § 305.86-8, the 
Conference addressed issues involving neutrals' availability, 
qualifications and acquisition. The present Recommendation seeks 
to elaborate on 86-8 in the specific context of contract appeals. 



OFFICIAL RECOMMENDATIONS 65 



ensuring the confidentiality of the proceedings. The guidelines, 
which should be used only as procedural suggestions, should also 
give each party the right to terminate the minitrial procedure at 
any time for any reason. Any guidelines acceptable to the parties, 
together with other provisions relevant to the resolution of the 
dispute, should be incorporated. 

(2) In selecting principals to represent the agency 
in a minitrial, agencies should ensure that principals in the 
minitrial agreement: 

(a) Are of sufficient rank in the agency 
to negotiate, and successfully defend, a binding settlement. 

(b) Have authority to bind their 
organizations in the dispute at hand, or at least to make 
recommendations that will be accorded substantial weight. 

(c) Ideally have little prior involvement 
with the case so as to be able to evaluate objectively the issues 
and the agency's potential liability. 

(d) Have enough background to grasp the 
main issues quickly. 

(e) Not be at such a high level that his or 
her involvement will detract in a major way from the agency's 
operations. 

Agencies should meet these concerns by, among other things, 
tailoring the rank of the principal to suit the magnitude of the 
case and by encouraging ADR use earlier in the case (e.g., the CO 
level). 

(3) Agencies should take steps to make 
participation as a principal an attractive career step and encourage 
or provide training in negotiation and mediation skills among 
groups of potential principals. 

(4) Principals should generally have access to 
technical, legal, accounting, or other advice from agency staff 
during the hearings and negotiations so as to produce a more well- 
informed, defensible resolution, enhance accountability, and build 
intra-organizational support for any settlement. Unless secrecy is 
especially important, it will ordinarily be unwise to sequester most 
minitrial witnesses, particularly experts, since a looser format may 



66 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

encourage dialogs or exchanges that can help focus issues and 
sometimes promote agreement. 

(5) Once the principals have had a chance to 
assess the strengths and weaknesses of both sides' positions, their 
negotiations should take place promptly and should be final and 
binding. The responsible principals ordinarily should have 
authority to resolve all issues before them without seeking further 
agency approval following the close of negotiations. 

(6) While the "neutral advisor" who helps the 
principals at a minitrial assess the merits of a case can be quite 
useful, the parties should consider foregoing such aid in cases 
where the principals already have a good working relationship, 
where issues are simple or amounts small, or, conversely, where 
complex technical issues predominate to such an extent that it 
would be futile to waste time trying to educate a neutral. 
Neutrals probably will also be less needed where the minitrial 
occurs early on- -for instance, at the CO level- -when positions 
may be less rigid, formal procedures not yet invoked, and fewer 
parts of the agency involved. In those cases, the CO might well 
serve as a sort of presider-principal. 

(7) A neutral advisor's role should be defined by 
the parties (at least tentatively) prior to the hearing by the 
principals. Any shift during the proceeding should be only with 
the concurrence of the principals. 

(8) Where minitrial neutral advisors are used, the 
parties should consider whether to seek their assistance in any of 
the following ways: 

(a) Presiding over the hearing; 

(b) Serving as a source of information, 
responding to technical legal questions, or offering insights and 
observations on issues in controversy; 

(c) Posing questions at the hearing so as 
to ensure that the basic facts are ascertained; 

(d) Suggesting novel approaches to 
presenting relevant information; 

(e) Working actively during the 
principals' negotiation sessions to aid settlement, as by advising 
each side on the strengths and weaknesses of its case, relevant 



OFFICIAL RECOMMENDATIONS 67 

legal principles, and how the law might apply to the facts 
established; 

(f) Serving as a mediator; 

(g) Suggesting that certain advisors or 
staff members be brought into the negotiations or briefed; or 

(h) Providing a written, nonbinding 
opinion to the principals, or helping them prepare a justification 
for the settlement agreed on. 



c. Mediation 

Agency boards of contract appeals should establish 
mediation programs in which parties can be required to attend an 
initial session with a mediator. The boards should require parties 
to be represented at the session by a person with authority to 
negotiate concerning the resolution of all issues in controversy. 
The boards may wish to exclude from these programs certain 
kinds of cases. Counsel should be required, where appropriate, to 
provide specified documents to the mediator, and to prepare short 
position papers. 



d. Settlement Judges 

(1) Agency boards of contract appeals should 
institute a procedure under which a settlement judge -- not the 
presiding judge in the case — may be appointed to preside over 
settlement conferences or negotiations, assess settlement potential, 
and work with the parties to explore possible settlement of a 
dispute. The settlement judge device should be capable of being 
invoked at the discretion of the chief judge on his or her own 
motion or that of any participant or the presiding judge. An order 
appointing a settlement judge should specify whether, and to what 
extent, the proceeding is suspended during the settlement 
negotiations and may define the scope of any negotiations to 
specified issues. The order may also expressly limit the period for 
settlement negotiations and require a brief report from the 
settlement judge. Each party should have the right to refuse to 
use the process, or to withdraw at any time. 

(2) The settlement judge should be deemed to 
have the power to suggest privately what concessions a party 



68 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



should consider, to confer privately as to the reasonableness of 
each party's case or settlement position, and to require that 
representatives with authority to negotiate concerning resolution of 
all issues in controversy be present at the settlement conference. 
The settlement judge shall be prohibited from discussing the 
merits of a case with any other BCA judge or other person, and 
shall not be called as a witness in the case. 



3. DOCUMENTATION AND OVERSIGHT 

a. Agencies should offer guidance to their personnel on 
the degree of documentation that is appropriate to justify 
settlements that have been reached via ADR; the guidance should 
emphasize the needs for flexibility without undermining 
accountability. For instance, the guidance could require the 
principal representing the agency in negotiations or his advisor to 
set down cost and other factors taken into consideration, the 
principal elements of the negotiation, likelihood of success at trial, 
and other significant facts or considerations justifying any 
significant differences between prenegotiation objectives and 
negotiated result; in short, a reflection of the thought process or 
rationale of officials who agreed to the settlement. This 
documentation should not exceed what would ordinarily be used to 
justify negotiated settlements of contract disputes, and should 
generally be written after the fact so that ongoing negotiations are 
not jeopardized or delayed. A neutral advisor who has helped the 
parties resolve a potentially serious case may be asked to help 
draw up the justification memo, or offer a brief advisory decision. 

b. Since the effectiveness of expanded reliance on 
ADR will depend in part on the degree of support or opposition 
from congressional committees and offices of inspector general, 
agencies should seek to document, and furnish periodically to 
relevant committees and oversight offices information on, the 
relative costs and benefits of ADR methods in cases where they 
have been used. Documentation should include case results, 
estimated savings, identities of principals and advisors, and nature 
of processes used. 



4. TRAINING AND OUTREACH 

a. Agencies should give priority attention to offering 
training in negotiation and other ADR skills to BCA judges. 



OFFICIAL RECOMMENDATIONS 69 



government attorneys, COs, and others involved in contract 
appeals. Training courses or seminars should be developed by 
agencies jointly or in cooperation with the Administrative 
Conference, Federal Mediation and Conciliation Service, Board of 
Contract Appeals Judges Association, American Bar Association, 
or other professional organizations. Agencies should also work 
with other interested groups to sponsor similar programs or 
outreach sessions for contractors and their representatives, and 
seek to incorporate materials on ADR into the training curricula 
for COs and project managers. 

b. Agencies should designate an employee to serve as 
an ADR specialist in connection with contract disputes, and 
should consider retaining the services of a trained mediator or 
similar professional to review cases for susceptibility to ADR, 
advise BCA judges, and mediate selected cases. 



70 



RECOMMENDATION 87-1 2: 

ADJUDICATION PRACTICES AND PROCEDURES 

OF THE FEDERAL BANK REGULATORY AGENCIES 



The five federal agencies that regulate the activities of 
depository institutions^ have broad statutory enforcement 
authority, including the power to issue cease-and-desist orders, 
impose civil money penalties, or order the suspension and removal 
of officers. Such enforcement actions ordinarily allow the target 
of the proposed sanction to request a formal APA hearing before 
an administrative law judge. 

In recent years, enforcement actions taken by the bank 
regulatory agencies have increased markedly, although the 
preponderance of these actions are taken without a formal hearing 
-- based on consent agreements or waivers of formal hearing. 
The current level of formal hearings has, however, reached the 
point where attention should be paid to the procedures and 
practices of the bank regulatory agencies in this regard. 

Three basic concerns have emerged from an evaluation of the 
formal hearing procedures of the bank regulatory agencies, which 
may be summarized as the need for: (1) consistency and greater 
uniformity in the agencies' implementation of shared statutory 
responsibilities, (2) greater accessibility of agency decisions and 



The term "depository institutions'* refers to commercial banks, savings banks 
and savings and loan associations, and credit unions. The five agencies are the Office 
of the Comptroller of the Currency (in the Department of the Treasury), the Board of 
Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, 
the Federal Home Loan Bank Board (including the Federal Savings and Loan 
Insurance Corporation), and the National Credit Union Administration. In the 
aggregate they will be referred to as the "bank regulatory agencies." 



OFFICIAL RECOMMENDATIONS 



71 



the basis for decisions, and (3) more efficient use of 
administrative law judges. 

Although the Conference study did not specifically address 
the need for change in the division of regulatory responsibilities 
among the five agencies, it did conclude that the interpretation of 
identical or similar regulatory authorities does not appear to be 
inconsistent. By contrast, the formal hearing procedures of the 
agencies vary significantly, both in their specific provisions and in 
their level of detail. Moreover, all of the regulations are lacking 
in detail on rules concerning prehearing practice, discovery and 
evidence. Given the similar statutory bases for these enforcement 
actions, the five agencies jointly should be able to develop 
substantially similar rules of procedure and practice for formal 
enforcement proceedings. 

There is currently limited publication or public dissemination 
of the bank regulatory agencies' enforcement decisions. This 
hinders counsel in advising and representing clients and makes it 
difficult for administrative law judges (who currently are all on 
loan from other agencies) to apply the complicated statutes and 
regulations that are involved. This situation would be remedied 
by improved availability or publication of appropriately redacted 
agency decisions. Such publication would heighten public 
awareness of enforcement actions which now are described only in 
aggregate data published in annual reports. This may be especially 
beneficial because the agencies have not regularly supplemented or 
clarified their enforcement policies through interpretive rules or 
policy statements. 

None of the five agencies employs administrative law judges 
(ALJs) to hear enforcement cases. Rather, they rely exclusively 
on the interagency ALJ loan program administered by the Office 
of Personnel Management (0PM) to furnish them with needed 
ALJs. OPM has attempted to accommodate agency concerns by 
providing lengthier loan periods and repeat loans. Nevertheless, 
the system seems to produce needless discontinuity and 
inefficiency. To improve this situation, the bank regulatory 
agencies should, in consultation with OPM, consider the 
advisability of an arrangement by which a pool of administrative 
law judges could handle all bank regulatory agencies' formal 
adjudications- -subject to any agency's decision to have its own 
ALJs, should the caseload warrant. If so, ways should be explored 
to effect such an arrangement. For example, one or more full- 



72 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

time judges could be hired by one of the agencies, which would 
then serve as the lending agency for the others. 

Finally, the Conference urges the agencies to explore whether 
a pre-complaint procedure (modeled on that used by the Securities 
and Exchange Commission) would be appropriate in their 
individual circumstances and should be established. This would 
enable targets of enforcement investigations to file a submission to 
the agency head or other agency official charged with the 
responsibility to initiate formal enforcement proceedings, before 
such an action is initiated. 

RECOMMENDATION 

The bank regulatory agencies should take the following 
actions to improve their formal adjudicatory processes, with 
respect to regulatory enforcement actions: 

1. Uniform Rules of Procedures . The agencies should 
develop, so far as feasible, a uniform set of rules of practice and 
procedure for formal adjudications, including more explicit 
provisions covering prehearing practice and discovery rules^ and 
the receipt of evidence.^ 

2. Availability of Decisions . The agencies should make 
available through regular publication, or other accessible means of 
dissemination, the appropriately redacted decisions and 
accompanying opinions issued in formal enforcement 
adjudications. 

3. Policv Articulation . The agencies should supplement and 
periodically clarify enforcement policies set forth in adjudicative 
opinions by regularly articulating their enforcement policies 
through rules of general applicability (including interpretive rules) 
and policy statements. 



2 

See ACUS Recommendation 70-4, Discovery in Agency Adjudication, 1 C.F.R, 



§305.70-4 

3see 
Agency Adjudications, 1 C.F.R. §305.86-2 



3 
See ACUS Recommendation 86-2, Use of the Federal Rules of Evidence in 



OFFICIAL RECOMMENDATIONS 73 

4. Administrative Law Judges . The agencies, in consultation 
with the Office of Personnel Management, should consider the 
advisability of an arrangement by which a pool of administrative 
law judges could handle all bank regulatory agencies' enforcement 
adjudications required to be conducted according to the 
Administrative Procedure Act, and, if so, should explore ways to 
develop such an arrangement. 

5. Precomplaint Notice . The agencies should explore, in 
their circumstances, the utility of establishing a formal or informal 
procedure to allow targets of investigations an opportunity to file 
a submission with the appropriate agency official before official 
action is taken to initiate an enforcement proceeding. 



75 



STATEMENT 12: 

RESOLUTION OF FREEDOM OF 

INFORMATION ACT DISPUTES 



The Administrative Conference sponsored a study of the 
resolution of disputes arising out of Freedom of Information Act 
("FOIA") requests that are not handled to the requester's 
satisfaction at the agency level. Specifically, the study proposed 
the establishment of an independent administrative tribunal to 
resolve these disputes, either in formal hearing proceedings or 
through informal conciliation. Alternatively, the study suggested 
the appointment of an ombudsman within the Department of 
Justice to review and report on agency FOIA decisions, mediate 
FOIA disputes, and/or provide informal assistance to persons 
requesting information from agencies under FOIA. 

Currently available data do not clearly establish the need for 
either of these specific mechanisms for handling FOIA disputes. 
The ability of the administrative tribunal in particular to increase 
the efficiency or effectiveness of FOIA dispute resolution is 
doubtful, especially given the moderate FOIA caseload 
(approximately 500 new federal court filings per year) and the 
high degree of public confidence in the current system of de novo 
judicial review of agency FOIA decisions. 

However, the Conference believes that greater reliance on 
informal approaches to FOIA dispute resolution could result in 
more effective handling of some FOIA disputes without resort to 
court litigation; thus these approaches bear further exploration. 
Accordingly, the Administrative Conference concludes the 
following: 



76 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

1 . The Conference does not at this time recommend 
supplanting or changing the currently available remedy of judicial 
review in federal district courts for requesters denied information 
under the Freedom of Information Act. However, the Conference 
does believe that a number of cases filed each year challenging 
agency denials of information under the Act could be resolved 
without litigation. Additionally, some disputes involving agency 
handling of Freedom of Information Act requests (i.e., issues such 
as processing delay, adequacy of the agency's records search, or 
availability of fee waivers as distinct from the outcome of the 
request on the merits) may arise from misunderstandings that 
could be quickly cleared up through informal investigation or 
discussion. Continuing attention should be given to developing 
mechanisms to simplify and to speed the process of review. 

2. The Department of Justice and other agencies handling 
FOIA requests should explore the voluntary use of informal 
alternative dispute resolution techniques, such as informal 
investigation of complaints, mediation or conciliation, and 
provision of a neutral government official to aid the parties in 
reaching settlement^, to avoid unnecessary litigation of Freedom of 
Information Act disputes, and should use these techniques when 
appropriate. 

3. On a limited basis, the Department of Justice already 
provides informal assistance to requesters that the Conference 
believes helps them in resolving Freedom of Information Act 
disputes. However, this function is not generally known to the 
public. These services would be valuable to a larger number of 
people than now receive them, and the Conference encourages the 
Department of Justice to explore means of making them better 
known and more generally available. 



^See ACUS Recommendation 86-3, Agencies' Use of 
Alternative Means of Dispute Resolution, Paragraph 10. 



REPORTS 

FOR 
RECOMMENDATIONS 87-1 THROUGH 87-7 



79 



ADMINISTRATIVE CONFERENCE OF 
THE UNITED STATES 

Report for 
RECOMMENDATION 87-1 



OSHA RULEMAKING PROCEDURES* 



Professor Thomas O. McGarity 
University of Texas School of Law 

Professor Sidney A. Shapiro 
University of Kansas School of Law 



January 12, 1987 

*Professors McGarity and Shapiro authored an additional report on 
OSHA that appears at 1 987 ACUS 999. 



80 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



TABLE OF CONTENTS 



Executive Summary 



I. The Difficult Environment of 
OSHA Regulation 

A. General Constraints Affecting 
Regulation 

1. Substantive Constraints 

2. Managerial Constraints 

a. More regulatory 
responsibilities 

b. Less scientific 
expertise 

c. Additional 
organizational burdens 

3. Legal Constraints 

4. Political Constraints 

B. The Possibility of Reform 

I I . Prioritization 

A. Sources of agency priorities 

1. Systematic Agency 
Priority Setting 

2. Rulemaking Petitions 

3. Congressional Pressure 

4. White House and 0MB 
Pressure 

5. TSCA Referrals 

6. Updated Private Standards 

7. NIOSH Criteria Documents 

8. Information From the Field 

9. Developments in States and 
Other Countries 

10. Summary . 

B. Alternative Prioritization 
Schemes 

1. Ad Hoc Management Choices 

2. Quantitative Listing 

a. Risk Assessment 

b. Megascoring Devices 

3. Pi lor i t i zation by Committee 

C. Recommendations 



OSHA RULEMAKING 81 



III. Management and Accountability 

A. Evaluation of the Current 
Rulemaking Management System 

1. The 1982 Regulation Management System 

2. The Current System 

B. Establishing and Monitoring 
Deadlines 

1. The Current Absence of 
Deadl ines 

2. EPA's Action Tracking 
System 

3. Advantages and Disadvantages 
of an Action Tracking System 

C. Inadequate Incentives 

D. Coordination Among Institutional 
Actors 

E. Lack of Policy Interchange 

F. Inability to Make Difficult 
Decisions 

G. Inadequate Resources 



82 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



EXECUTIVE SUMMARY 

Regulatory reform at OSHA has been considered by each 
successive administration at the agency. This report explains 
why such reform is so difficult, explores some realistic 
opportunities for reform, examines the advantages and 
disadvantages of each, and suggests steps OSHA might take to 
improve its efficiency and productivity. 

I . The Difficult Environment of Regulation 

The productivity of health and safety agencies, such as 
OSHA, is limited by substantive, managerial, legal, and 
political factors. The necessity to undertake the complex 
scientific and policy judgments required by Congress and the 
White House are important substantive constraints. The small 
size of agency staffs, the difficulty of attracting and 
retaining good scientists, managers and policy analysts, and 
the rapid turnover of agency administrators are important 
managerial constraints. Legal constraints include a public 
hearing process and other court-imposed procedural and 
substantive requirements. Finally, political constraints 
include the necessity of accommodating various interest groups. 
Congress and the White House as the agency makes difficult 
moral and philosophical choices. 

OSHA shares with other health and safety regulatory 
agencies the foregoing constraints, but it faces unique 
additional difficulties that increase their impact. OSHA is 
not a licensing agency (which would encourage industry 
cooperation), it often has less accurate risk and feasibility 
evidence (because industry is not required to supply the 
necessary information), and it has more difficult 
priority-setting responsibilities (because it must choose which 
hazards to regulate from a large agenda). Moreover, although 
it has as many or more regulatory responsibilities as any other 
agency, special problems with scientific and administrative 
resources and management capability limit its ability to meet 
that challenge. Some of these problems are inherent in the 
structural organization of OSHA, and the others are caused by 
the agency. Further, unlike some other agencies, OSHA engages 
in hybrid rulemaking to promulgate standards, and it bears the 
burden of proving by "substantial evidence" that regulation is 
necessary. Finally, OSHA is guaranteed an unusual amount of 
political controversy because of the long history of antagonism 
between business and labor. 

In light of the previous difficulties, it is remarkable 
that OSHA has accomplished as much as it has. Nevertheless, it 
is also clear that much remains to be done. Knowledgeable 
observers are generally pessimistic that OSHA can effectively 
fulfill its statutory mandate, and even those who are 
optimistic are rather guarded in their hopes. 

A high degree of caution is certainly appropriate. The 
problems at any health and safety agency, and especially at 
OSHA, are complex. Moreover, reform of an ongoing agency is 



OSHA RULEMAKING 83 



difficult, because it upsets the expectations of both 
supporters and opponents of agency action. Finally, groups 
representing labor, management, physicians, other health 
professions, and public interest organizations perceive the 
need for change according to their professional orientations. 
Because each group differs in orientation, OSHA reform is 
"contested terrain." With these realities in mind, this Report 
proposes two kinds of ref orms--OSHA should establish a better 
priority setting system, and it should implement new management 
tools to enhance accountability. 

II. Prioritization. 

With current resources, OSHA can pursue no more than 15-20 
major rulemaking efforts at any given moment, and it can take 
on only about 2-5 new projects in any single year. There are 
presently at least nine sources of rulemaking initiatives that 
vie for OSHA ' s attention as it attempts to establish a 
rulemaking agenda: OSHA's own (but largely abandoned) 
systematic prioritization efforts; worker and consumer group 
petitions; congressional demands for action; pressure from the 
White House or 0MB; referrals from EPA pursuant to The Toxic 
Substances Control Act; NIOSH criteria documents; private 
standard-setting agencies; information collected from the 
field; and developments in the states and other countries. 

Ideally, OSHA should channel all of these sources into its 
own comprehensive agenda-setting mechanism to establish a 
realistic set of priorities for the near term. Although OSHA 
comes close to achieving this ideal for safety standards, it 
has no agenda-setting process at all for health standards. In 
reality, its priorities for health standards are determined in 
an ad hoc fashion by outsiders. Virtually every knowledgeable 
observer of the OSHA rulemaking process agrees that this is a 
sorry state of affairs that is badly in need of correction. 
There is less agreement, however, on how OSHA should go about 
regaining control over its own agenda. 

A. The Need for a Prioritization Process. 

An appropriate metaphor for the current OSHA standard 
setting process is that of a business establishment with a 
front door, a side window, and a back door. The owner expects 
most business to come through the front door, but it reserves 
the back door for dealing with complaints about previous 
transactions. Especially demanding and impatient customers 
come in through the side window and thereby avoid the crowd 
that is pressing at the front door. In the OSHA context, 
criteria documents, recent petitions, information from the 
field, and recently amended recommendations from private 
standard setting organizations are all pressing at the front 
door. 0MB and the White House are pushing some previously 
promulgated rules in through the back door, and Congress and 
the courts are forcing some rulemaking petitions and other 
"hot" topics through the side window. At present, the press of 



84 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



business for OSHA's reduced staff from the back door and side 
window is so great that it cannot accept any business through 
the front door. Instead of an orderly queue at the front 
door, there is a great crowd of potential topics, each of which 
is probably deserving of OSHA's attention. Occasionally, an 
interest group becomes impatient with waiting in line and moves 
over to the side window. The time is near at hand when there 
will also be a disorderly crowd at the side window, petitioning 
Congress or the courts to demand that OSHA take up additional 
topics. OSHA long ago lost control over its front-door 
agenda; it now risks total paralysis as its limited capacity to 
produce rules becomes overwhelmed by the press at the side 
window . 

The current process does not necessarily result in greater 
worker protection, because no one of the outside parties 
driving the current process is concerned with the broad 
question whether the agency is addressing those topics for 
which it can be most effective in reducing the most serious 
workplace risks. OSHA's inability to set its own priorities 
also affects the regulated industry's ability to make future 
investment decisions. An explicit and open prioritization 
procedure would allow OSHA to regain to some extent control 
over its own agenda, and it would make regulatees and 
beneficiary groups aware of OSHA's plans for the future. An 
explicit prioritization mechanism would also be useful to OSHA 
in its internal management and in managing outside contracts 
for economic and technical analysis. A commitment to 
establishing an explicit prioritization process will, however, 
force the agency to come up with a rational scheme for ranking 
priorities, and it will force upper level decisionmakers to 
make hard decisions about which subjects warrant 
attention .Although OSHA can expect resistance from those with 
an economic interest in the hazards that wind up on the list, 
OSHA must assume control over its own rulemaking agenda. 

RECOMMENDATION: OSHA should as rapidly as 
possible establish an entity to determine an 
explicit list of agency priorities to which OSHA 
will presumptively adhere in undertaking future 
rulemaking intiatives. 

B. Alternative Prioritization Schemes. 

Although the question of prioritization is never 
an easy one for an agency charged with writing 
high-stakes regulations in an area dominated by poor 
information and huge uncertainties, there are several 
broad models from which OSHA may choose in selecting 
an approach to prioritization, including ad hoc 
management choices, systematic selection by 
committee, numerical scoring systems, and 
quantitative risk assessment. The advantages and 
disadvantages of each broad approach are discussed in 
detail in the Report. 



OSHA RULEMAKING 85 



We strongly recommend that OSHA establish a 
procedure for priority-setting for its rulemaking 
activities. Since OSHA does not currently have a 
priority-setting mechanism in place, this will 
require additional resources or a reprogramming of 
existing resources. 

RECOMMENDATION: OSHA should make 
priority-setting a high priority. The agency 
should consider devoting at least one full-time 
staff person to the task, and the priority 
setting unit should be given sufficient 
resources to gather information on candidates 
for priority lists and to perform risk 
assessments and megascoring exercises. 

The Committee approach seems the most promising 
of the three approaches discussed in the Report. 

RECOMMENDATION: OSHA should establish a 
permanent prioritization committee charged with 
drafting an initial ranked list of agency 
priorities from the 47 topics that resulted from 
the standards improvement project and from 
pending rulemaking petitions. The committee 
should be further charged with meeting on a 
continuing and periodic basis to re-examine the 
existing list, add items to it, and remove items 
from it. To preserve badly needed continuity, 
committee membership should not turn over any 
more rapidly than once every three years, and 
committee members should be eligible for 
reappointment . 

The membership of the committee should reflect 
both technical expertise and political sensitivity. 
One way to ensure this would be to make the Committee 
a formal advisory committee composed of nonemployees 
consisting of technical experts and representatives 
of a broad range of constituency groups. Such a 
committee could not, however, be an actual 
decisionmaking entity; it could only make 
recommendations to agency management. Alternatively, 
the committee could be composed of agency employees 
from various offices in the agency and chaired by a 
very high level agency employee, such as one of the 
Deputy Assistant Secretaries. 

RECOMMENDATION: OSHA should establish a 
prioritization committee made up of OSHA 
employees with nonvoting representatives from 
NIOSH and EPA. The committee should be composed 
of high level management staffers at at least 
the Deputy Director level and highly regarded 
health professionals from the agency's technical 



86 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



staff. The Committee should meet regularly (at least 
quarterly and perhaps monthly) to establish an initial 
prioritization list and to consider amendments to the 
list. The meetings, which would discuss policy as well as 
technical considerations, should be closed to the public, 
but the results of the meetings should be made public, 
after the Assistant Secretary has had an opportunity to 
consider and overrule any decision made by the committee. 

If the committee is established in accordance with the 
above recommendation, its first task of drafting an initial 
ranked list will be quite burdensome and no doubt 
controversial. OSHA could reduce some of the controversy 
surrounding its initial list by subjecting it to public comment 
and by assigning substances to ranked categories, rather than 
attempting to rank each topic individually. 

RECOMMENDATION: The entity that establishes agency 
priorities should publish and allow public comment on a 
proposed list of 50-75 rulemaking topics. The list should 
either rank the topics individually or assign them to 
classes. OSHA should take the position that the list is 
not a final rule for which judicial review would be 
appropriate . 

One possible device to aid the committee in this initial 
task would be to hold one or more "consensus workshops'* that 
all committee members would attend and during which all of the 
relevant interest groups would attempt to agree on a consensus 
list of priorities. 

REC0Mf4ENDATI0N: Prior to establishing an initial priority 
list, OSHA should hold one or more consensus workshops at 
which relevant interest groups would be asked to agree 
upon a consensus list of priorities. 

The Committee should use existing risk assessments in 
establishing its initial prioritization list and in undertaking 
subsequent modifications, but it should be aware of the 
drawbacks of risk assessments, and it should not allow risk 
assessments alone to determine priorities. Existing 
"megascoring" schemes are so laden with pitfalls that the 
Committee should devote little attention to them. If the 
Committee is to perform its ambitious task expeditiously, it 
must resist the temptation to develop its own megascoring 
device and proceed ahead with whatever information is 
conveniently available. The Committee should likewise resist 
the temptation to incorporate by reference lists of toxic 
chemicals that have been developed for other purposes. 

RECOMMENDATION: The entity that establishes agency 
priorities (subject to approval of the Assistant 
Secretary) should use existing risk assessments, as well 
as other technical and policy considerations, in carrying 



OSHA RULEMAKING 87 



out its task. It should not commission full-blown risk 
assessments in setting the initial priorities list, but it 
may decide to develop more sophisticated risk assessments 
in modifying the list. The entity should not develop its 
own megascoring device for setting priorities, and it 
should not incorporate by reference lists prepared by 
other agencies for other purposes. 

The committee and its staff should begin with a relatively 
long list of potential candidates for its priority list and it 
should at the end of a relatively short period of time (perhaps 
six months) produce a ranked or graded list for circulation and 
comment. After the first list has been completed, the 
committee should continue to monitor scientific reports and 
other developments for information that might cause the agency 
to change the list. In particular, the committee should have 
systematic access to reports from the field for indications 
that topics not on the list deserve greater agency attention. 
OSHA should therefore continue its efforts to make information 
from the field more accessible to agency decisionmakers. 

To preserve needed flexibility, OSHA should establish an 
additional "side window" process for workplace hazards that are 
identified after the list is promulgated or for which important 
policy considerations warrant rapid treatment. The "side 
window" process would be used for rulemaking petitions and TSCA 
referrals, which would be treated as petitions to amend the 
current priorities list. OSHA would respond within a definite 
time period (perhaps 120 days). The agency must not, however, 
allow the side window to become the dominant source of 
rulemaking initiatives. To prevent this, OSHA should 
promulgate procedural regulations governing petitions and TSCA 
referrals, specifying criteria for giving expeditious treatment 
to a topic. Such criteria should include: (1) the degree of 
hazard; (2) the quality of the data indicating hazard; (3) the 
administrative resources required to undertake the new project; 
(4) the match between the expertise required for the project 
and the expertise available to the agency; (5) whether the 
proposed project would result in greater protection for workers 
than projects currently at the top of the list; and (6) other 
important public policies. In the final analysis, the agency 
must demonstrate to the public that the more rational 
front-door process does in fact work. And this means that OSHA 
must bring rulemaking initiatives to completion on a regular 
basis. 

RECOMMENDATION: OSHA should establish a process 
for expediting prioritization decisions for 
topics that are the subject of TSCA referrals, 
rulemaking petitions, and intense pressure from 
Congress, 0MB and the White House. Although 
this expeditious process should be separate from 
the agency's routine prioritization process, it 
should be closely integrated with the routine 



88 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



process. The outcome of the expedited process 
should be the placement of the topic on the 
priority list or a determination not to proceed 
ahead with the project and a public explanation 
for the action. 

Once OSHA establishes a workable process for 
prioritizing future projects that is sufficiently- 
flexible to address legitimate requests for priority 
changes, it should have little to fear from a lawsuit 
requesting a court to order it, in effect, to move a 
project to the top of the list. 

Since Congress intended that OSHA rely upon 
NIOSH for technical advice in setting priorities, 
OSHA should solicit NIOSH' s input in assembling the 
initial prioritization list. OSHA should also 
communicate changes in its priorities to NIOSH at a 
very early stage, so that NIOSH may- schedule its 
projects to complement OSHA's rulemaking efforts. 
More importantly, OSHA should attempt to adhere to 
its original prioritization plan as closely as 
possible to avoid schedule conflicts and wasted 
resources. Since OSHA will never be able to adhere 
completely to any pre-established priority list, it 
should work with NIOSH to add some flexibility to 
NIOSH's schedule. In particular, NIOSH should 
maintain a capacity to respond on a "fast track" to 
OSHA requests for technical help on projects that 
come through the "side window." 

RECOMMENDATION: OSHA should include NIOSH in 
drafting its initial priority list and it should 
make NIOSH aware of all changes to that list. 
OSHA should work with NIOSH to establish a 
capacity in NIOSH to respond rapidly with 
information on projects that are assigned to 
move on a fast track through OSHA. 

Finally, OSHA should also coordinate carefully 
with the National Toxicology Program (NTP) and EPA 
concerning OSHA's future information needs. Both NTP 
and EPA have the capability of generating new 
information on suspect chemicals, a capacity that 
OSHA lacks. If OSHA could arrive at a priorities 
list that extended three or four years in the future, 
it could approach NTP or EPA to initiate studies on 
the chemicals that would be the subjects of future 
rulemaking initiatives. OSHA should also coordinate 
with EPA to take advantage of any authorities that 
EPA has to protect employees more effectively than 
OSHA can under its own authorities. 

RECOMMENDATION: OSHA should attempt to enter 
into a formal interagency agreement with EPA and 
NTP for making EPA and NTP aware of OSHA's needs 
for testing toxic substances to which workers 



OSHA RULEMAKING 



are exposed. OSHA should also attempt to enter 
into a formal interagency agreement for 
coordinating the exercise of the authorities of 
the two agencies in way that most effectively 
protects employees from workplace risks. 

Although OSHA has undertaken some modest 
informal efforts in the last six years to coordinate 
with other agencies, there is no formal institutional 
entity with the capability of ensuring appropriate 
communication and forcing necessary cooperation. The 
interaction that does occur is at lower levels where 
bureaucratic "turf" considerations overwhelm the 
current meager incentives to cooperate. During the 
Carter Administration, the Interagency Regulatory 
Liaison Group, which was composed of the heads of 
OSHA, EPA, FDA, CPSC, and FSIS, provided the 
institutional impetus to cooperation. OSHA should 
pursue the possibility of reviving the IRLG or of 
creating a similar entity to perform the coordination 
function suggested here. 

Establishing an IRLG-like coordinating 
institution would require some additional resources 
in resource-scarce times, but the savings in avoided 
duplication alone should be worth the cost. The most 
foreboding obstacle to setting up such an institution 
is likely to be the Office of Management and Budget, 
which perceives itself as playing this coordinating 
role. The short answer to this objection is that 0MB 
has had since the abolition of the old IRLG in 1981 
to fill the gap, and it has not done so. The 
coordination function for OSHA standard setting must 
be initiated and operated by the agencies themselves, 
and it must have the support and active participation 
of officials at the very highest levels of those 
agencies . 

RECOMMENDATION: OSHA and other health and 
environmental agencies, such as EPA, the Food 
and Drug Administration, the Food Safety and 
Inspection Service and the Consumer Product 
Safety Commission, should form a high level 
group charged with coordinating agency policies 
and information relevant to regulating health 
and environmental hazards. 



90 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



III. Management and Accountability. 

Although the extraordinarily lengthy interval between 
initiation and publication of OSHA rules has been the subject 
of negative commentary for years, the agency seems no closer to 
a solution than it was in the mid-1970 's. While some of OSHA's 
problems may be systematic or externally imposed, OSHA can 
significantly improve its internal management, and such 
improvements should substantially reduce the incidence of 
grossly delayed rulemaking initiatives. 

A. Evaluation of the Current Rulemaking Management System. 

OSHA has traditionally been organized along functional 
lines, maintaining separate Directorships for Health Standards, 
Safety Standards, Technical Support, Field Operations, Policy 
and Administrative Programs. OSHA is only one of many agencies 
in the Department of Labor, and it must clear important 
rulemaking actions at the Departmental level. The Department 
has always maintained a separate Solicitor's Office, apart from 
the individual operating agencies, to provide legal advice to 
all of the agencies within the Department. 

In its early years, OSHA was a very loosely run 
organization, and especially so in its rulemaking functions. 
In 1982 OSHA implemented extremely complicated internal 
procedures that are best described as "byzantine." Their 
excessive documentation requirements and repetitive review 
procedures provided almost insuperable barriers to the 
production of rules, and in fact only one rule of any 
consequence was produced during the 3-4 years that those 
procedures were in place. After a time, the intricate rules 
were observed mostly in their breach, and in late 1985 they 
were abandoned. The 1982 procedures have not been replaced 
with any particular management regime. 

Despite the elimination of the burdensome 1982 paperwork 
requirements, the agency's internal production has speeded up 
only slightly. OSHA still needs a management and 
accountability system to ensure that upper level management's 
priorities are communicated to lower level staff, to ensure 
that bottlenecks do not develop, and to ensure that responsible 
agency officials are held accountable for inexcusable delays. 
To accomplish this result, OSHA management must seriously 
address at least six severe management problems that currently 
plague OSHA's internal rule management process: (1) the 
absence of effective mechanism for establishing and monitoring 
deadlines for achieving internal milestones; (2) inadequate 
incentives to meet established deadlines; (3) the absence of a 
mechanism for facilitating policy interchange between upper 
level management and lower level staff; (4) the lack of 
coordination among essential institutional actors; (5) the 
inability or unwillingness of upper level management to make 
difficult substantive decisions in a timely fashion; and (6) 
inadequate resources. 



OSHA RULEMAKING 91 



B. Establishing and Monitoring Deadlines. 

At present, OSHA has in place only the most rudimentary 
system for setting deadlines for its regulatory activities. 
The Work Plan that some project officers prepare at the outset 
of a project and the Options Memorandum that is prepared for 
Departmental review contain proposed timetables, but these 
deadlines are never formally affirmed and they are rarely 
enforced. Upper level management meets twice a year to prepare 
the agency's proposed regulatory agenda for submission to 
Departmental officials and 0MB. But the deadlines in the 
agenda are not regarded seriously by most agency employees, and 
they are only very rarely met in practice. The deadlines taken 
most seriously by agency staff are unpublished deadlines set in 
informal status meetings. These meetings, however, occur after 
various milestones are met, and not at specific pre-arranged 
time intervals. Time projections are continually subject to 
informal adjustment without explanation as priorities change 
due to outside pressures or other resource needs. The meetings 
are therefore not effective as "action-forcing" devices. 

OSHA does not have any systematic approach for tracking 
the progress of its rulemaking initiatives. The project 
officer from the Health or Safety Standards Directorate is 
responsible for keeping the action on schedule, and the 
Director maintains close enough contact with the staff to know 
which actions are on track and which actions are slipping. The 
Office of the Assistant Secretary does not currently have a 
formal way of ascertaining on a periodic basis the status of 
OSHA's rulemaking. As one official explained: "We keep it in 
our heads." While such informal tracking devices may be 
appropriate for an institution with a small number of 
responsibilities that are of limited societal importance, they 
are entirely inappropriate for a modern federal agency of 
OSHA's status. 

OSHA must establish a system for establishing and 
monitoring progress toward the attainment of realistic 
deadlines for its rulemaking initiatives. It is critical that 
these deadlines be attainable and not pie-in-the-sky 
projections. Yet once realistic deadlines are established, 
they should not be easily avoided. Since rulemaking 
initiatives are invariably prolonged affairs, the system should 
be capable of setting and tracking both major milestones such 
as the Assistant Administrator's approval of rulemaking 
projects, and less visible minor milestones, such as the time 
that all relevant offices must assign a staff member to the 
project. The Environmental Protection Agency has established a 
computerized "Action Tracking System," described in detail in 
the Report, that could serve as a useful model for a similar 
system of establishing and tracking deadlines in OSHA. 

Effective implementation of an Action Tracking System 
could greatly improve the internal rulemaking process in OSHA. 
Rules could no longer disappear into the bowels of the agency, 
never to be seen again, because all approved rulemaking 
initiatives would be in the tracking system. The system would 



92 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



also be useful in uncovering bottlenecks. Finally, the Action 
Tracking System could identify resource conflicts and point to 
programs that need more resources. 

The Action Tracking System is not, however, without its 
disadvantages. First, its heavy emphasis on meeting production 
deadlines may sacrifice quality. Second, it will require 
additional staff. Third, a high degree of upper level 
attention is absolutely critical to the successful operation of 
the system, and this is necessarily quite demanding of very 
high level officials. Fourth, the information in the action 
tracking system can become public, putting the agency in an 
embarrassing position before courts and congressional 
committees . 

In the final analysis, however, the advantages of the 
action tracking system far outweigh its disadvantages. Quality 
need not be sacrificed for "bean counting," if the agency is 
conscious of the problem, plans its resource needs in advance, 
matches those needs to realistic projections of resource 
availability, and allows deadline slippage for genuine quality 
concerns. Because the system would rely heavily upon 
computers, its personnel demands would be slight, and computer 
resource needs would not be large. Revealing slippage to the 
world may be embarrassing, but it also renders the agency 
accountable to the public. 

RECOMMENDATION: OSHA should immediately establish an 
Action Tracking System, modeled on the system in effect at 
the Environmental Protection Agency, to document the 
progress of rulemaking initiatives. The system should 
contain deadlines for meeting standardized major 
milestones and additional intermediate minor milestones in 
the progress of a rule's development. The Assistant 
Secretary or one of the Deputy Assistant Secretaries 
should meet on a biweekly basis with the Directors and 
Deputy Directors of the OSHA Directorates, the Deputy 
Assistant Solicitors for OSHA Health and Safety Standards, 
and perhaps a representative from the Departmental Policy 
Office to discuss progress toward designated milestones 
and reasons for any missed deadlines. OSHA should appoint 
a staff of one or two employees, which might be lodged in 
the Policy Office, to manage the Action Tracking System. 

C. Inadequate Incentives. 

There is a general sense among agency staff that agency 
management does not reward production and does not penalize 
lethargy. Management has very few tools available for 
providing incentives. The agency has a very limited budget 
available for cash awards and merit bonuses, and penalties for 
nonproduction are very difficult to administer. 

Given the large salary differentials between the public 
and private sectors, a sense of mission may be the most 
significant tool that OSHA has to attract and retain energetic 
professional staff. But symbols are fragile--if they are not 
backed up with resources, they will appear hypocritical and 



OSHA RULEMAKING 93 



quickly be ignored. The Action Tracking System described 
earlier has the built-in incentive of avoiding embarrassment, 
which is usually effective for professionals in bureaucracies. 
But there should also be financial incentives to reward good 
and speedy work. 

RECOMMENDATION: Upper level management in OSHA should 
attempt to convey to OSHA professionals the message that 
OSHA's task is an important one that requires commitment 
to the expeditious implementation of the agency's 
statutory mandate. OSHA management should reinforce such 
symbolic messages with real rewards for expeditious work 
and penalties for unwarranted delays. 

D. Coordination Among Institutional Actors. 

Developing a rule requires the input of several 
institutional entities within OSHA and the Department of 
Labor. The Policy Office in OSHA is responsible for gathering 
cost and feasibility information. The Solicitor's Office, 
which is not part of OSHA, must review documents to be 
published in the federal register, draft certain parts of those 
documents, and prepare expert witnesses for testimony at the 
hearings. Since the project officer has no direct control over 
these other crucial actors, the project officer must either 
induce them to do their jobs in an expeditious fashion, do 
their jobs for them, or elevate matters to mid-level 
management. But even at higher levels, the three offices have 
encountered problems in coordinating their priorities. 

The Directors of the Health and Safety Standards 
Directorates have traditionally attempted to coordinate 
informally with their counterparts in the other Offices on an 
ad hoc basis, but this has not generally proved satisfactory. 
First, the need for coordination too often becomes apparent 
only after problems have already arisen. Second, the ad hoc 
approach deals with only those problems that are of sufficient 
magnitude that the project officer brings them to the attention 
of the Office Director. Third, the informal approach will not 
resolve genuine disagreements over what the priorities should 
be. Finally, the informal approach will not prevent the other 
offices from using delay to advance particular substantive 
agendas. A more formalized procedure is needed to force 
coordination among the relevant institutional actors and to 
obtain upper level resolution of differences on a regularized 
basis . 

The Action Tracking System described previously is an 
ideal vehicle for this purpose. With such a system in place, 
the Health or Safety Standards Directorate would enter a 
proposed schedule into the system at the time the project was 
approved by upper level management. The other relevant offices 
would have an opportunity to comment upon the proposed schedule 
before it became final. Any disputes over the proposed 
schedule could be resolved in one of the periodic high level 
meetings. If a deadline was missed, the responsible offices 
would be obliged to explain the slippage at one of the 



94 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



meetings. The location of the bottleneck or delaying activity 
would become immediately apparent, and resource needs could be 
identified. Conflicts in priorities would also be revealed to 
upper level management who would then be in a position to 
resolve such conflicts on-the-spot. 

In addition, the team concept, which OSHA formally 
abandoned in 1985, can help avoid schedule conflicts at the 
lower levels in the agency. At the most basic level of 
interaction between the essential institutional actors, there 
is in fact a good deal of coordination. The problems with the 
team concept that the agency encountered in the early 1980s can 
be overcome. Although the team leader does not have line 
authority over other members of the team, an Action Tracking 
System should provide some inducement to team members to 
perform expeditiously. The team approach does raise the 
possibility of "renegade teams" that form their own opinions on 
issues and inform the press when those opinions differ from 
those of agency policymakers. While this may be a problem 
during a time of weak management and very low agency morale, 
the fear that lower level staff will gang up on upper level 
decisionmakers is not a good reason to abandon a vital 
decisionmaking tool. Finally, when a team that works well 
together is established, there is every reason to keep it 
together to work on other projects. 

RECOMMENDATION: OSHA should formally reinstate the team 
concept to perform the basic tasks of gathering or 
analyzing information, drafting documents, responding to 
comments and advising the Assistant Secretary. OSHA 
should attempt to coordinate rulemaking initiatives 
through the Action Tracking System previously 
recommended. OSHA should consider allowing successfully 
functioning teams to work on more than a single rulemaking 
initiative . 

E. Lack of Policy Interchange. 

OSHA lacks a procedure for communicating policy from upper 
level management to the low level professionals who draft 
rules. Typically, once a rule is assigned to a project 
officer, he or she is allowed to develop the rule, with the 
help of other employees drawn from OSHA and the Solicitor's 
Office, without much upper "level supervision until there is a 
draft of a notice of proposed rulemaking. While this maximizes 
the freedom of lower level staff to incorporate technical data 
and scientific and engineering judgments into the final 
rulemaking product, it minimizes upper level policy input. 
Purely technical considerations may cause lower level staff to 
eliminate alternatives that might be attractive from a policy 
perspective, thereby depriving upper level management of an 
opportunity to chose from among a full range of options. 

This hierarchical approach to developing a proposed rule 
has a vast potential for unnecessary delay. If the upper level 
managers are dissatisfied with the staff's output, they may 
either send the staff back to the drawing board or return the 



OSHA RULEMAKING 95 



project to the staff for time-consuming patch and repair. In 
the absence of written acounts of important decisionmaking 
meetings, agency staffers are obliged to decide many issues 
anew in future proceedings. 

OSHA could reduce this large potential for duplicative and 
time-consuming remands to the staff by establishing an "Options 
Review" process for periodically elevating issues from the 
staff level to very high levels in the agency. Under this 
approach, which has been effectively implemented at the 
Environmental Protection Agency, Options Review meetings are 
held at critical junctures to choose which regulatory options 
the agency will actively pursue throughout the remainder of the 
rulemaking process. The participants in the Options Review 
meetings are a very high level official (at least a Deputy 
Assistant Secretary) and other high level agency employees 
representing offices with an interest in the proceeding. The 
Options Review meeting, which is memorialized in a closure 
memorandum, occurs after the team has devoted some study to the 
relevant issues but before it has narrowed down the options to 
the two or three to which it will devote the bulk of its 
attention. The Options Review process gives upper level 
management a large role in the subtle policymaking that goes on 
at low levels in the bureaucracy when options are examined and 
rejected as the staff attempts to reach consensus. Low level 
staff are also attracted by its potential to force high level 
resolution of difficult policy issues. By giving the lower 
level professionals a "day in court" before a high level agency 
decisionmaker early in the process, the process interjects a 
"creative" adversarial note into internal agency deliberations. 

The chief disadvantage to the Options Review process is 
that it consumes a great deal of the time of very high level 
officials. Second, the process demands that very high level 
officials narrow options on the basis of a relatively brief 
debate. Third, it requires upper level decisionmakers to take 
direct responsibility for difficult decisions. On balance, 
however, the advantages of the Options Review mechanism 
outweigh its disadvantages. 

RECOMMENDATION: OSHA should implement an Options Review 
process for important health and safety rulemaking 
initiatives. At least once in the early development of 
such rules the staff should identify and analyze several 
options for consideration in an Options Review meeting 
chaired by the Assistant Secretary or one of the Deputy 
Assistant Secretaries. The goal of Options Review 
meetings should be to discuss and debate broad 
alternatives for approaching a rulemaking initiative and 
to narrow the range of options to be considered in the 
future. The meeting should be memorialized in a closure 
memorandum that would be made available to staff involved 
in other rulemaking initiatives. 

OSHA could conceivably fold an Options Review Process into 
the implementation of an Action Tracking System, should it 
choose to adopt that system. The key to a successful Action 



96 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Tracking System is the periodic (biweekly in EPA) meetings of 
the Deputy Administrator with mid-level management to report on 
the status of pending projects. Similarly, the key to the 
Options Review Process is the meetings of the Deputy 
Administrator with upper and mid-level management to narrow 
options. In a small agency like OSHA, it may be possible to 
combine these two functions in to a single two-part "Status 
Review and Options Selection/Rejection" meeting of the 
Assistant Secretary or one of his Deputies with mid-level 
management . 

G. Inability to Make Difficult Decisions. 

Since delay is always in the interest of some interested 
party, OSHA decisionmakers often face strong pressures not to 
decide difficult questions. Decisionmakers may also have 
technical reasons for not deciding, such as the desire to await 
the completion of one more study that has the potential to 
reduce some very large uncertainties. Sometimes there is a 
legitimate need to do further work to avoid the possibility of 
reversal in the courts of appeals, but sometimes the desire for 
more information is a convenient excuse not to decide difficult 
questions . 

OSHA has shown an increasing tendency to rely upon Advance 
Notices of Proposed Rulemaking (ANPRs) to solicit information 
for regulated industries and other interested parties. The 
ANPR can be an effective tool for gathering information early 
in the development of a rule. But there is a general feeling 
among agency staff and among outside practitioners that the 
ANPR rarely results in the production of useful information. 
Most observers of the process believe that the ANPR at best 
serves the function of putting companies on notice that the 
agency is seriously considering promulgating a standard for 
them; it rarely induces them to share useful information with 
the agency. Since it can delay the rulemaking schedule by six 
months to a year, the ANPR can be used to avoid hard decisions. 

RECOMMENDATION: OSHA should not routinely use the Advance 
Notice of Proposed Rulemaking as an information gathering 
technique. Only when information that is not available 
through other vehicles is very likely to be forthcoming in 
response to an Advance Notice of Proposed Rulemaking 
should that tool be used. 

There is a generally shared belief among the lower level 
staff that past Assistant Secretaries, for whatever reasons, 
took too long to make policy decisions and communicate them to 
the staff. A related complaint is that upper level 
decisionmakers sometimes return controversial rules to the 
staff for further work on particular issues knowing full well 
that the additional work is not likely to be 
outcome-determinative . 

It is difficult to determine how much of this perception 
is attributable to an unwillingness of upper level management 
to decide hard questions and how much is due to the impatience 



OSHA RULEMAKING 97 



of agency staff and beneficiary groups. Some rules have been 
put off indefinitely out of upper level management fears of 
stirring up political controversy. But upper level management, 
which is ultimately responsible for the agency's output, has 
every right to demand further analysis of critical issues, even 
when it is not obvious to the staff that further analysis will 
change the ultimate outcome. Part of the problem is probably 
the lapse of "management memory" that accompanies the rapid 
turnover rate in OSHA's upper level management. 

There is no easy way to address these potential sources of 
delay. Clearly, management should attempt to alleviate staff 
concerns that their efforts will be placed on the back burner 
for political reasons. But the staff must be sensitive to the 
realities of the political world in which upper level 
decisionmakers must deal. To some extent the problem may be 
alleviated by better communication between staff and upper 
level officials. If lower level staff professionals were 
allowed to attend the Options Review meetings proposed in this 
Report, better communication might result. Of course, as a 
quid pro quo, lower level professional staff cannot feel free 
to leak the contents of such discussions to the media. 

H. Inadequate Resources. 

If OSHA is serious about increasing its ponderous 
rule-generating pace, it must demand a substantial infusion of 
resources. The Health Standards Directorate is seriously 
understaffed. Individual health professionals in that 
Directorate are responsible for multiple projects. At the same 
time they are attempting to manage the rule generation process, 
they must answer correspondence for projects that they are 
assigned, answer petitions for new rulemaking initiatives, 
draft responses to TSCA referrals, meet with other agencies, 
and meet other professionals. In addition, OSHA badly needs 
the infusion of fresh blood. The creation of new positions in 
the Health Standards Directorate would allow the agency to hire 
new staffers. 

RECOMMENDATION: OSHA should seek additional resources for 
the Health Standards Directorate. It should attempt to 
fill any new slots for occupational health specialit ists 
with highly motivated young professionals. 

The recommendation that the agency seek additional 
resources in a time of severe monetary constraints on social 
programs that provide long-term benefits may well fall on deaf 
ears, but that makes the need no less critical. It is 
hypocritical for Congress and 0MB to criticize OSHA for poor 
work if they are unwilling to provide sufficient resources for 
the agency to do a good job. Whether or not OSHA gets new 
resources for expanding the size of the Health Standards 
Directorate, it can make some management improvements that 
should result in more efficient use of existing resources. 



98 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



I. The Difficult Environaent of OSHA Regulation 

Health and safety agencies, such as OSHA, have significant 
constraints that limit productivity. No health and safety agency 
has been able to promulgate regulations for more than two or 
three controversial chemicals in any year. During its entire 
sixteen year history, OSHA has completed only eighteen health 
and twenty-six safety regulations.^ That record, however, should 
not be denigrated. Not only does OSHA labor under the same 
constraints as other health and safety agencies, but it has 
additional, serious limitations not faced by most of its 
counterparts. When these additional limitations are taken into 
account, it is surprising OSHA has been able to regulate at all. 

Any proposal for reform of OSHA must therefore be made in 
light of the various constraints that limit regulatory 
productivity. Both constraints that affect regulation in general 
and OSHA in particular are considered. 

A. General Constraints Affecting Regulation 

The productivity of health and safety agencies is limited by 
four types of constraints. Agencies face substantive, 
managerial, legal, and political limitations. 

1. Substantive Constraints 

Agency productivity is limited as a substantive matter by 
the necessity to undertake the complex scientific and policy 
judgments required by Congress and the White House. Agencies 
must engage in the type of risk, benefit, and cost or feasibility 



1. R. MERRILL, FEDERAL REGULATION OF CANCER- CAUSING CHEMICALS, 
1982 ACUS 113; see also Toxic Substances; EPA and OSHA Are 
Reluctant Regulators , 203 SCIENCE 28 (1979) (EPA and OSHA take 
"•years'* to complete a rulemaking proceeding). 

2. U.S. CONGRESS, OFFICE OF TECHNOLOGY ASSESSMENT, PREVENTING 
ILLNESS AND INJURY IN THE WORKPLACE 363 (1985) (cited hereinafter 
as PREVENTING INJURY) ; see , also Schroeder & Shapiro, Responses 
to Occupational Disease; The Role of Markets, Regulation, and 
Information , 72 GEO. L.J. 1231, 1257 (1984) (cited hereinafter as 
Responses To Occupational Disease ) . 

3. PREVENTING INJURY, supra note 2, at 364. 



OSHA RULEMAKING 99 



determinations required by their statute. In most cases, they 
must also calculate the benefits and costs of any proposed 
regulations to satisfy Executive Order 12291. 

Risk assessment requires that the reliability of safety data 
be evaluated and that its relevance for human exposure, use, or 
consumption be determined.^ These assessments require both 
scientific judgments, to determine such matters as the 
statistical validity of an animal experiment,' and policy 
judgments, to determine such matters as how to predict the 
consequences of human exposure from animal studies. Policy 
judgments like the prediction of human risk are especially 
complex because animal test data is often limited, because humans 
may be more or less susceptible to toxic effects than the animals 
studied, and because human exposure or use may occur under 



4. See , e.g. , Federal Insecticide, Fungicide, and Rodenticide 
Act (FIFRA), 7 U.S.C. § 136d (1982); Consumer Product Safety Act, 
15 U.S.C. § 1262(i) (1982); Toxic Substances Control Act (TSCA), 
15 U.S.C. 2605(d) (1982); Food Drug & Cosmetic Act, 21 U.S.C. 

§ 348(c) (1982) (food additives); j^. at § 355 (new drugs); Clean 
Air Act, 42 U.S.C. § 7408 (1982); see generally Cross, Beyond 
Benzene; Establishing Principles For aSignificance Threshold On 
Regulatable Risks of Cancer , 35 EMORY L.J. 1, 5-12 (1986). 

5. Exec. Order 12291, 3 C.F.R. § 127 (1981), reprinted in 5 
U.S.C. § 601, at 431 (1982); see note 113 infra & accompanying 
text (0MB oversight of OSHA). 

6. See , Shapiro, Scientific Issues and The Function of Hearing 
Procedures: Evaluating the FDA's Public Board of Inquiry , 1986 
DUKE L.J. 288, 291-92 (cited hereinafter as Scientific Issues ) . 
Relevant data usually consist of experiments conducted to 
evaluate the effect of a substance on animals and epidemiological 
studies evaluating the effect of prolonged exposure to a 
substance. Id . at 292. In a few cases, there will be data from 
clinical experiments performed on humans, ^d^. ; see Shapiro, 
Divorcing Profit Motivation From New Drug Research: A 
Consideration of Proposals To Provide FDA With Reliable Test 
Data , 1978 DUKE L.J. 155, 157-58 (human evidence is used by FDA) ; 
see generally NATIONAL ACADEMY OF SCIENCES, NATIONAL RESEARCH 
COUNCIL, RISK ASSESSMENT IN THE FEDERAL GOVERNMENT: MANAGING THE 
PROCESS (1983) (cited hereinafter as RISK ASSESSMENT IN THE 
FEDERAL GOVERNMENT). 

7. Scientific Issues , supra note 6, at 295. 

8. Id. at 294; McGarity, Substantive and Procedural Discretion 
in AdmlrTistrative Resolution~of Scientific Policy Question"sT 
Regulating Carcinogens in EPA and OSHA , 67 GEO. L.J. 729, 731-49 
(1979 (cited hereinafter as Resolution of Scientific Policy 
Questions) . 



100 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



different conditions which impose different degrees of risk.^ 

Benefit assessment requires an estimate of how many lives 
might be saved by a proposed regulation and a calculation of the 
economic value of those lives. The first estimate is based on 
a risk assessment which, as explained above, in itself is 
difficult to derive. The second estimate is hampered by the 
inability to quantify the value of human life, the inability to 
price reduced risks to persons not yet in existence, and the 
tendency to ignore other variables that are difficult to quantify 
in monetary terms (such as psychological costs). 

Cost and feasibility analysis requires an agency to sum the 
forecasted costs of implementing various levels of protection for 
consumers or workers.^ Agencies have difficulty acquiring 
reliable cost information and, when the information exists, it 
can produce uncertain predictions. Agencies also have 
difficulty evaluating the costs of secondary economic effects, 
such as anticompetitive and employment effects, because of their 
amorphous nature. 

The previous determinations are necessarily time-consuming 
because an agency must find the required information and 
undertake the relevant assessments. Although OSHA is subject to 
that problem, it also has several additional problems as compared 
to other health and safety agencies. For example, because the 
Food and Drug Administration (FDA) is a licensing agency, it 
generally enjoys more cooperation from its regulated 
industries. Since industry must obtain FDA's approval to market 
a product, it is in its economic interest to cooperate with the 



9. Responses To Occupational Disease , supra note 2, at 1231- 
37; McGarity, Media Quality, Technology, and the Utilitarian 
Ideal; Alternative Strategies for Health and Environmental 
Regulation of the Chemical Industry , 46 LAW & CONTEMP. P. 159, 
185 (1984) (cited hereinafter as Alternative Strategies ) . 

10. Alternative Strategies , supra note 9, at 188. 

11. See supra note 9 and accompanying text. 

12. Alternative Strategies , supra note 9, at 188-89. 

13. _Id. at 181-82. 

14. ld_. at 181. 

15. Id. at 183. 



OSHA RULEMAKING 101 



agency. By comparison, industry's economic incentive at OSHA 
is to delay regulation. Even if OSHA eventually orders an 
industry to undertake expensive changes, considerable savings can 
be generated if those costs can be postponed. 

Another and related advantage of FDA is that it has the 
legal authority to require drug manufacturers to test the safety 
of new drugs in both animals and humans. ° By comparison, OSHA, 
which lacks similar authority, has a more difficult time 
acquiring the safety information necessary to make a 
decision. Moreover, OSHA has the more difficult task of 
normally having only animal data to predict the consequences of 
human exposure. Finally, because it acts on any application it 
receives, FDA does not have to set priorities concerning what 
chemicals it will regulate. OSHA, however, must spend some of 
its scarce resources to resolve difficult questions concerning 
what chemicals should be regulated before others. ^■'■ 



16. Interview with Ben Mintz, Professor of Law, Catholic 
University, in Washington D.C. (September 25, 1986) (former head 
of OSHA Division, Office of Solicitor, Department of Labor). 

17. Interview with David Vladeck, Public Citizen, in 
Washington, D.C. (Sept. 25, 1986); Interview with Ben Mintz, 
supra , note 16; see Huber, The Old-New Risk Division in 
Regulation , 69 VA. L. REV. 1025, 1035 (1983) (under licensing 
regulation, the regulatee bears the risk and cost of delay, but 
under standard setting the regulatee derives economic benefits 
from delay) . 

18. See McGarity & Shapiro, The Trade Secret Status of Health 
and Safety Testing Information; Reforming Agency Disclosure 
Policies , 93 HARV. L. REV. 837, 868-69 (1980); Shapiro, Limiting 
PhysicFan Freedom To Prescribed A Drug For Any Purpose; The Need 
for FDA Regulation , 73 NW. U.L. REV., 801, 803 (1978) [cited 
hereinafter as Need for FDA Regulation ] . 

19. See Part IIIG infra (OSHA lacks information necessary to 
reach decisions); see generally Huber, supra note 17, at 1034 
(licensing regulation places cost of acquiring necessary 
information on the regulatee, while standard setting places that 
cost on the agency.). 

20. See Responses To Occupational Disease , supra note 2, at 
1258. 

21. See Part II infra. 



102 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



The Environmental Protection Agency (EPA) also has several 
advantages over OSHA. When EPA acts as a licensing agency, ^ it 
enjoys the same advantages as FDA that result from that 
function. Furthermore, EPA did not engage in the past in both 
risk and feasibility analysis to determine national ambient air 
quality standards, although lately it has undertaken both 
responsibilities to submit data to 0MB. EPA did not feel 
compelled to undertake risk analysis because Congress mandated 
the agency to regulate, giving it the discretion to determine 
only what level of regulation was appropriate. EPA also can 
assess cost data more easily than OSHA because the technology 
used to control exposure is often sold by vendors which are 
independent of the regulated industry. ^^ Finally, feasibility 
analysis in some of EPA's programs does not involve the difficult 
value choices that cause OSHA so much trouble. For example, OSHA 
must choose whether to implement its standards through expensive 
engineering controls, such as ventilation systems, or through 
less expensive personal protective devices, such as 
respirators.^^ As a result, OSHA feasibility analysis is usually 
bitterly contested between unions, which favor engineering 
controls, and the regulated industry, which favors personal 
protective devices. 

Because of the previous disadvantages, OSHA faces evaluation 
problems that are more complicated, its access to information is 
more limited, and it has more responsibility to choose which 
chemicals to regulate. These difficulties are compounded by the 
common and unique managerial constraints under which OSHA 
operates. 

2 . Managerial Constraints 

Because government has difficulty attracting and retaining 



22. See 7 U.S.C. § 136 (1984) (FIFRA) ; see also , 15 U.S.C. 
§ 2603 (ar~( 1982) (TSCA) . 

23. See notes 17-18, 21 supra and accompanying text. 

24. See T. MCGARITY, REGULATORY ANALYSIS IN THE FEDERAL 
GOVERNMENT, REPORT TO THE ADMINISTRATIVE CONFERENCE OF THE UNITED 
STATES III-389 (1985). 

25. See , e.g. , D. McCAFFREY, OSHA AND THE POLITICS OF HEALTH 
REGULATION 87 (1982) (Society of the Plastic Industry claimed 
vinyl chloride standard would shut down the industry, but firms 
manufacturing or using the chemical subsequently had little 
difficulty complying with the regulation.). 

26. Responses To Occupational Disease , supra note 2, at 1259. 

27. Id. 



OSHA RULEMAKING 103 



good scientists and policy experts,^® agencies become dependent 
on advisory committees and consultants to carry out their 
regulatory missions. ^ This dependence, however, creates 
problems of accountability and coordination for these agencies. 

Health and safety agencies are also constrained by the size 
of their staffs. Because agencies have a relatively small number 
of scientists to undertake rigorous scientific and policy 
analysis, only a few chemicals or products can be considered for 
regulation at any one time."^^ Budget and staffing constraints 
have increased this concern. The growth in government spending 
on regulatory activities has slowed considerably in the first 
five years of the Reagan Administration (increasing by only 
eleven percent in nominal dollars from FY 1981-85). And overall 
staffing by regulatory agencies has fallen by eleven percent in 



28. See DEPARTMENT OF HEALTH, EDUCATION & WELFARE, REVIEW 
PANEL ON NEW DRUG REGULATION, FINAL REPORT 45 (1977) (cited 
hereinafter as HEW FINAL REPORT ). Scientists and policy analysts 
are discouraged from government work because salaries are often 
noncompetitive, there are fewer opportunities for esteem and 
personal satisfaction, and they regard the regulatory function to 
be bureaucratic and uninteresting from a scientific 
perspective. Id . at 45-46. 

29. Scientifc Issues , supra note 6, at 302-303. 

30. Id. 

31. See Mendeloff, Does Overregulation Cause Underregulation? 
The Case of Toxic Substances , REGULATION, Sept. /Oct., 1981, at 50 
(cited hereinafter as Does Overregulation Cause Underregulation? ) 
(Shortage of personnel restricts scope of EPA and OSHA activities 
and increases burdens on executive scientific staff); Levin, 
Politics & Polarity; The Limits of OSHA Reform , REGULATION, 

Nov. /Dec, 1979, at 37 (Since its inception, OSHA has been 
"drastically underfunded for its mission of assuring 'every 
working man ... in the nation safe and healthful working 
conditions. •") 7 see also Interview with Debra Jacobson, Counsel, 
Subcomm. on Investigations of the House Comm. on Energy and 
Commerce, in Washington, D.C. (October 16, 1986) (funding levels 
for NIOSH are inadequate to undertake new research); Occupational 
Safety and Health Improvements Act of 1980; Hearings on S. 2153, 
S. 14b6, & S. 1572 Before the Senate Comm. on Labor and Human" 
Resources , 96th Cong., 2d Sess. 231 (1980) (Statement of Elmer 
Chatak, AFL-CIO) (NIOSH lacks the research capabilities to 
function effectively as scientific advisor for OSHA) . 



104 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



the same period. 



32 



A final managerial constraint is that agency administrators 
often quickly come and go. OSHA is a good example of this 
phenomenon. In its fifteen years of existence, no Assistant 
Secretary has served longer than about two years, with the 
exceptions of Eula Bingham (almost four years) and Thorne Auchter 
(three years). -^ It is probably not an accident that much of the 
agency's regulatory activity occurred during the Bingham and 
Auchter regimes. 

Staffing and leadership problems are permanent features of 
administrative government. OSHA, however, has three additional 
disadvantages in terms of management constraints as compared to 
FDA and EPA. It has more regulatory responsibilities, less 
scientific expertise, and more organizational burdens. 

a. More regulatory responsibilities 

OSHA has been given the responsibility to regulate any 
chemical that poses a significant hazard to workers and, to the 



32. Washington Post, June 4, 1984, at Dll, reprinted at R. 
PIERCE, S. SHAPIRO, P. VERKUIL, ADMINISTRATIVE LAW AND PROCESS, ' 
4.3.3, at 94 (1985) (citing a study by the Center for the Study 
of American Business of Washington University); see R. LITAN & W 
NORDHAUS, REFORMING FEDERAL REGULATION 127-28 (1983) (Reagan 
Administration has used "severe" budget cuts to restrain 
government regulation) . 

33. The chronology of service is: 



John Pendergast 

Vacant 

Robert Rowland 

Vacant 

Thorne Auchter 

Vacant 

Eula Bingham 

Vacant 

Morton Corn 

Vacant 

John Stender 

Vacant 

George Guenther 



May 86 
July 85 
July 84 
Mar. 84 
Mar. 81 
Dec. 80 
Mar. 77 
Jan. 77 
Dec. 75 
July 75 
Apr. 73 
Jan. 73 
Apr. 71 



present 
May 86 
July 85 
July 84 
Mar. 84 
Mar. 81 
Dec. 80 
Mar. 77 
Jan. 77 
Dec. 7 5 
July 7 5 
Apr . 7 3 
Jan. 73 



8 


mos. 


10 mos 


1 


yr. 


4 


mos. 


3 


yrs. 


3 


mos . 


3 


yrs. 


3 


mos . 


1 


yr. 


5 


mos. 


2 


yrs. 


3 


mos. 


1 


yr. 



9 mos 



1 mo. 



3 mos 



9 mos 



34. Compare PREVENTING INJURY, supra note 2, at 363-64 (chart 
of when regulatory standards were issued) with note 33, supra 
(chart of time of service of Assistant Secretaries.) 



OSHA RULEMAKING 



105 



35 



Since there are 



many of which may be 
ilminq.^^ 



extent feasible, make every workplace safe 
thousands of chemicals used in industry, 

dangerous, this responsibility is overwhelming .~'" Cognizant of 
this problem. Congress required OSHA in 1971 to adopt and enforce 
voluntary, consensus industry health and safety codes, including 
some 400 exposure ceilings for toxic substances set by the 
American Conference of Governmental Industrial Hygienists 
(ACGIH) . Congress also established a National Institute for 
Occupational Safety and Health (NIOSH), located in the Department 
of Health and Human Services, to develop recommendations, called 
criteria documents, for exposure limits for toxic materials. ° 
Congress intended that OSHA would update the 1971 standards as it 
received recommendations from NIOSH; in the meantime workers 
would be protected under those standards. This system, 
however, has not worked as intended. 



35. 29 U.S.C. § 655(b)(5) (1982). 



36. See Responses To Occupational Disease ^ 
1232. 



supra note 2, at 



37. Id . at 1257, see Hamilton, The Role of Nongovernmental 
Standards in the Development of Mandatory Federal Standards 
Affecting Safety and Health , 56 TEX. L. REV. 1329, 1388-91 (1978) 
(description of OSHA adoption of consensus standards). Safety 
codes were derived from the national consensus standards of the 
American National Standards Institute, the National Fire 
Protection Association, and some existing federal standards for 
maritime safety. Viscusi, Reforming OSHA Regulation of Workplace 
Risks , in REGULATORY REFORM: WHAT ACTUALLY HAPPENED 248 (L. Weiss 
& M, Klass eds. 1986) (cited hereinafter as Reforming OSHA ) . For 
a description of how voluntary consensus standards are created, 
see Hamilton, supra at 1338-68; Stokinger, Modus Operandi of 
Threshold Committee of ACGIH , 9 ANN. AM. CONF. OF IND. HYG. 133 
(1984). 

38. Id. at 1257. 



39. See Interview with Bob Gombar, Venable, Baetjer, Howard & 
Civiletti, in Washington, D.C. (Oct. 30, 1986) (Congress 
erroneously expected that OSHA could quickly adopt new 
standards) . 



106 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Because the system is so resource intensive, OSHA has been 
largely unable to update or supplement the 1971 standards .^^ In 
the meantime, industry groups, such as the ACGIH, have made 
hundreds of changes. ^^ At the same time, NIOSH has recommended 
that OSHA change the 1971 exposure standards or create new 
standards for over a hundred chemicals. ^ Because OSHA has not 
been able to act on these recommendations, millions of workers 
face exposures that are in compliance with the 1971 OSHA 
standards, but which are considered dangerous by the newer ACGIH 
and NIOSH recommendations.*"' 

OSHA has been ambivalent about admitting that its agenda of 
regulation is unmanageable. In 1983, an OSHA staff memorandum 
recommended that the agency stop working on the development of 
revised exposure level standards for 115 substances because of 
OSHA's limited staff and resources.** OSHA publicly denied it 
had any intention of abandoning that work, but it has taken no 



40. Since 1971 OSHA has completed only eighteen rulemaking 
proceedings which adopted health standards for only twenty-five 
substances. See note 2 suyra . It has also issued health 
standards for a cancer policy, for employee access to medical and 
exposure records, for occupational noise, and for hazard 
communications. 16_. Since 1971, it has issued twenty-six safety 
standards. Id . 

41. For example, since publication of its 1968 
recommendations, which were the ones adopted by OSHA in 1971, the 
ACGIH has lowered exposure limits for over 100 of the chemicals 
on the 1968 list, and it has established exposure limits for 
about 200 additional chemicals. Mendeloff, Regulatory Reform and 
OSHA , 5 J. POLICY ANALYSIS & MANAGEMENT 440, 442 (l986) (cited 
hereinafter as Regulatory Reform & OSHA ); see , also , PREVENTING 
INJURY, supra note 2, at 257-260. Similar discrepancies exist 
for safety standards. For example, a 1976 Presidential Task 
Force estimated that the OSHA machine-guarding standards (which 
had been adopted in 1971) covered only fifteen percent of the 
types of machines in use. OSHA SAFETY REGULATION: REPORT OF THE 
PRESIDENTIAL TASK FORCE 14 (P. MacAvoy ed. 1977) [hereinafter 
cited as OSHA SAFETY REGULATION]. As of 1984, that standard had 
not yet been revised or expanded. PREVENTING INJURY, supra note 
2, at 226. — — 

42. PREVENTING INJURY, supra note 2, at 258; Responses To 
Occupational Disease , supra note 2, at 1257. 

43. Regulatory Reform & OSHA , supra note 41, at 442. 

44. See Peterson, OSHA May Drop Standard-Setting Efforts , 
Washington Post, September 21, 1983, at A2 . 



OSHA RULEMAKING 107 



actions to finish it. ^ 

With the breakdown of the congressional system to manage its 
workload, OSHA faces the difficult task of addressing a 
regulatory agenda perhaps larger and more complex than any other 
agency. Its efforts to do so are seriously constrained by the 
fact that OSHA has less access to scientific expertise than most 
agencies. 

b. Less scientific expertise 

OSHA is unique in its inability to manage many of the 
scientists doing work relevant to its regulatory process. NIOSH, 
which researches what chemicals and substances should be 
regulated, is located in the Department of Health and Human 
Services, ^^ a situation which creates serious coordination 
problems. For example, the most ambitious attempt by OSHA and 
NIOSH to cooperate to increase the effectiveness of OSHA 
regulation has ended in failure. ° Further, OSHA officials have 
complained in the past that NIOSH criteria documents, which 
summarize the need for a regulation, contained insufficient 
information to allow OSHA to announce a rulemaking for the 



45. PREVENTING INJURY, supra note 2, at 261. The last public 
hearing concerning any of the 115 substances, beryllium, was in 
1977, and there has been no public activity on any of the others 
since 1975. Id . 

46. Responses To Occupational Disease , supra note 2, at 1256- 
57. 

47 . See Occupational Diseases, 1977; Hearings Before the 
Subcomm. on Labor of the Senate Comm. on Human Resources , 95th 
Cong., 1st Sess. 83 (1977) (Statement of Gregory Ahard, GAO) 
(Standards delayed because OSHA and NIOSH have limited teamwork, 
different priorities, and lack joint efforts at data collection). 

48. See F. THOMPSON, HEALTH POLICY AND THE BUREAUCRACY: 
POLITICS AND IMPLEMENTATION 235 (1981). In the mid-1970s OSHA 
and NIOSH started actions to add requirements for exposure 
monitoring, medical surveillance, employee training and 
education, recordkeeping, or warning labels and signs for the 
consensus standard OSHA adopted in 1971. PREVENTING INJURY, 
supra note 2, at 227. No regulatory actions were ever completed 
under that project. Id. 



108 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



4Q 

regulation. 

Because NIOSH is not located within OSHA, the agency's 
access to scientific expertise, other than that of its ovm staff 
is through consultants. Other agencies, by comparison, can 
rely on an advisory committee system. FDA, for example, uses a 
large number of standing advisory committees to solicit advice 
concerning approval of new drugs. This system gives FDA access 
to some of the leading scientists in the country. ^^ 



49. Telephone Interview with Grover Wrenn, President, Environ 
Corp. (Oct. 23, 1986) (former Director, Directorate of Health 
Standards, OSHA); F. THOMPSON, supra note 48, at 235; PREVENTING 
INJURY, supra note 2, at 261; T. GREENWOOD, KNOWLEDGE & 
DISCRETION IN GOVERNMENT REGULATION 118 (1984); COMPTROLLER 
GENERAL OF THE UNITED STATES, GENERAL ACCOUNTING OFFICE, DELAYS 
IN SETTING WORKPLACE STANDARDS FOR CANCER- CAUSING AND OTHER 
DANGEROUS SUBSTANCES 32 (1977) (cited hereinafter as DELAYS IN 
SETTING STANDARDS). 

50. B. MINTZ, OSHA: HISTORY, LAW & POLICY 65 (1984); Interview 
with Ben Mintz, supra note 16 (OSHA currently relies "heavily" on 
consultants) . 

51. See DEPARTMENT OF HEALTH, EDUCATION & WELFARE, REVIEW 
PANEL ON NEW DRUG REGULATION, INTERIM REPORT: THE USE OF STANDING 
ADVISORY COMMITTEES BY THE BUREAU OF DRUGS OF FDA (1977) (cited 
hereinafter as USE OF STANDING ADVISORY COMMITTEES). 

52. HEW FINAL REPORT , supra note 28, at 52. The report 
stated: 

Experts provide valuable advice on complex technical issues 
and assist the agency in deciding critical questions of 
scientific judgment . . '. . [A]dvisory committees [also] 
offer FDA a dialogue with the nation's foremost experts in 
drug therapy. The Committees are thus an important source 
of peer review for proposed FDA decisions. For these 
reasons, use of advisory committees increases public and 
industry acceptance of FDA decisions and improves the 
credibility of the agency. 

Id. 



OSHA RULEMAKING 109 



OSHA has the legal authority to appoint advisory 
committees, but none have been appointed since 1976. OSHA 
apparently has abandoned the committees because they imposed some 
administrative burdens, because they have an unwieldy 
structure, and because they did not give useful advice. This 
decision, however, appears in retrospect to have been 
unwarranted. Although none of the previous problems are 
insurmountable, the agency has forgone one type of scientific 
advice that has proven useful to other agencies. 



53. 29 U.S.C. at § 565(b); see generally Ashford, The Role of 
Advisory Committees in Resolving Regulatory Issues Involving 
Science and Technology; Experience from OSHA and EPA , m LAW AND 
SCIENCE IN COLLABORATION 169 (J. Nyhart & M. Car row eds . 1983). 
The agency also has a permanent, balanced advisory committee, 
known as the National Advisory Committee of Occupational Safety 
and Health (NACOSH) . 29 U.S.C. at § 656(a). 

54. B. MINTZ, supra note 50, at 65; PREVENTING INJURY, supra 
note 2, at 353-64. 

55. Professor Mintz reports that no advisory committees were 
appointed in part because OSHA was bothered by the requirements 
for federal advisory committees established by 0MB during the 
Carter Administration ^nd by the requirements of the Federal 
Advisory Committee Act, 5 U.S.C. App. § 7 (1982). B. MINTZ, 
supra note 50, at 65. 

56. Advisory committees are to have no more than fifteen 
persons and are to be balanced between "persons qualified by 
experience and affiliation to present the viewpoint of employers 
involved" and "persons similarly qualified to present the 
viewpoint of the workers involved." 29 U.S.C. at § 656(b). In 
addition, a committee must include at least one representative of 
a state health and safety agency and may include other persons 
"who are qualified by knowledge and experience to make a useful 
contribution," so long as the number of such persons does not 
exceed the number of representatives of federal and state 
agencies. Id . 

57. See T. GREENWOOD, supra note 49, at 130 (advisory meeting 
"did little more than provide a forum for the contending parties 
— labor and employers — to argue with each other."); Risk 
Assessment Research, 1984; Hearings on H.R. 4192 Before the 
Subcomm. on Natural Resources, Agriculture Research and 
Environment of the House Comm. on Science and Technology , 9 8th 
Cong., 2d Sess. 145 (1985) (Statement of Nicholas Ashford, MIT 
Center for Policy Alternatives) (OSHA advisory committees became 
tools for political manipulation). 

58. Methods to resolve OSHA's problems with advisory 
committees will be addressed in a forthcoming report for ACUS. 



1 10 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



c. Additional organizational burdens 

OSHA's proposed regulations must be reviewed by the 
Solicitor's Office and other officials of the Department of Labor 
(DOL) . Since these offices are part of DOL, OSHA has no 
organizational authority to set deadlines or other management 
guidelines for them. Both agency employees^^ and others^^ report 
that decisionmaking delays in the Solicitor's Office and other 
DOL departments are difficult for OSHA to manage. 

Another type of management burden is created for OSHA by its 
ovm internal organization. The promulgating of a standard 
requires input from a variety of disciplines including 
economists, industrial hygienists, and others. These various 
professionals, however, are located in different departments, 
called "Directorates," in OSHA. Thus, the Directorate of Health 
Standards Programs performs risk assessment, the Directorate of 
Policy performs economic and feasibility analysis, and the 
Directorate of Technical Support assists in those functions.^ 
Because the administrators of these Directorates are co-equal, no 
single Director has the authority to set deadlines or other 



59. See , e.g. , Interview with Frank White, Deputy Assistant 
Secretary, OSHA, in Washington, D.C. (Sept. 26, 1986) 
(coordination with offices in DOL presents problems); Interview 
with Barry White, Director, Directorate of Safety Standards 
Programs, in Washington, D.C. (September 26, 1986) (Solicitors 
Office can be "slowest link" in OSHA decisionmaking); Interview 
with John Martonik, Directorate of Health Standards, OSHA, in 
Washington, D.C. (September 26, 1986) (slippages in 
decisionmaking caused in DOL) . 

60. See Occupational Safety and Health Improvements Act of 
1980 , supra note 31, at 1230 (Statement of Lane Kirkland, AFL- 
CIO) (timely progress in health standard development hampered by 
delays in Solicitor's office of DOL); Harter, In Search of OSHA , 
REGULATION, Sept. /Oct., 1977, at 36 (It is "at best difficult" 
for OSHA to act because DOL officials "adopt their own schedules 
and priorities . . . ."). 

61. See Part HID infra (how Solicitor's Office slows OSHA 
regulation) . 

62. Harter, supra note 60,. at 38 (organizational structure at 
OSHA is a "nightmare"); Interview with Steven Bokat, United 
States Chamber of Commerce, in Washington, D.C. (Sept. 9, 1986) 
(OSHA is "bureaucrat ically ponderous"). 

63. See lA 1 supra (health and safety regulation requires 
risk, benefit, cost and feasibility analysis). 

64. T. McGARITY, supra note 24, at III 192-93. 



OSHA RULEMAKING 1 1 1 



management guidelines for the others. Unless the Assistant 
Secretary, or that person's staff, directly supervises day-to-day 
operations, no suitable mechanism exists to ensure accountability 
and dispute resolution. By comparison, FDA does not depend on 
the agency's Administrator to supervise day-to-day operations: a 
staff person is in charge of coordinating the efforts of the 
various disciplines. ^ Both agency employees ° and others 
report that the failure of previous OSHA administrators to 
address this problem has slowed decisionmaking for health 
standards. °° 

The effects of the previous problems are cumulative. At the 
same time OSHA has a larger regulatory agenda than almost any 
other agency, it lacks scientific and administrative resources 
and management capability. OSHA's ability to regulate has also 
been constrained by its common and unique legal procedures. 

3. Legal Constraints 

All health and safety agencies must use some type of public 
process before a regulation can be promulgated. Although a few 



65. See DEPARTMENT OF HEALTH, EDUCATION & WELFARE, REVIEW 
PANEL ON NEW DRUG REGULATION, INTERIM REPORT, FDA's REVIEW OF 
INITIAL IND SUBMISSIONS: A STUDY OF THE PROCESS FOR RESOLVING 
INTERNAL DIFFERENCES AND AN EVALUATION OF SCIENTIFIC JUDGMENTS 
14-15 (1977) (interdisciplinary team, under the control of a 
supervising medical officer, evaluates the safety and efficacy of 
new drugs ) . 

66. See , e.g. , Interview with John Martonik, supra note 59 
(slippage is "inevitable" because of need "to coordinate with 
other units that may have their own problems"); Interview with 
Frank Frodyma, Director, Directorate of Policy, OSHA, in 
Washington, D.C. (Sept. 26, 1986) (No mechanism exists to force a 
"consensus" between those persons who must participate to 
promulgate a standard) . 

67. DELAYS IN SETTING STANDARDS, supra note 49, at 23. 

68. See Part HID infra (failure of OSHA Administrator to 
coordinate Directorates is a source of delay). 



1 12 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



decisions are made through informal rulemaking. many others are 
made by the more cumbersome hybrid rulemaking, or, in a few 
cases, by the extremely cumbersome formal rulemaking. ^ In 
complicated cases, formal hearings can take months since parties 
have the ooportunity to present evidence and cross-examine 
witnesses. The use of such extensive procedures has been 
challenged on the ground they are unnecessary for the type of 
scientific and policy judgments made by health and safety 
agencies. ^ Nevertheless, the time spent during a hearing often 
is only a small part of the total time consumed by agency 
decisionmaking. 

Agencies are also constrained by procedural and substantive 
requirements imposed by the courts. As a procedural matter, 
agencies have been given additional responsibilities concerning 



69. See , e.g. , 15 U.S.C. § 2605 (1982) (Toxic Substances 
Control Act); 42 U.S.C. § 6924 (1982) (Resource Conservation and 
Recovery Act) . 

70. See , e.g. , 33 U.S.C. § 1317(b)(1) (1982) (Clean Water 
Act); 42 U.S.C. § 7607(d) (1982) (Clean Air Act); 29 U.S.C. § 
655(f) (1982) (OSHA) . For a discussion of hybrid rulemaking, see 
ACUS, A Guide to Federal Agency Rulemaking (1983). 

71. See, e.g. , 21 U.S.C. § 348(f), 355 (c)(1)(B) (Supp. II 
1984) (FDA regulation of food additives and human drugs). 

72. Hamilton, Rulemaking On A Record by the Food and Drug 
Administration , 50 TEX. L. REV. 1132 (1972). 

7 3 . See , e.g. , Resolution of Scientific Policy Questions , 
supra note 8, at 750. 

74. This is the case at OSHA. See notes 84-85 infra and 
accompanying text. 



OSH A RULEMAKING 113 



how they conduct a rulemaking proceeding. As a substantive 
matter, agencies have been given additional responsibilities 
concerning how they justify any rules that they adopt. 
Although whether these requirements produce better decisions is 
the subject of a lively debate, there can be no dispute that 
agencies must now devote additional time and resources to the 



75. The obligation to give "adequate notice", 5 U.S.C. 

§ 553(b)(3) (1982), requires agencies to disclose fully their 
basis and purpose for a rule when it is proposed, and to hold a 
second hearing if that basis and purpose changes. See , e.g. , 
United States v. Nova Scotia Food Prods. Corp., 568 F.2d 240, 252 
(2d cir. 1977) (agency must give new notice if it significantly 
changes the data or methodology on which it will base a rule) ; 
Portland Cement Association v. Ruckelshaus, 486 F.2d 375, 394 
(D.C. Cir. 1973) (agency must reveal in notice of rulemaking the 
data and methodologies on which it intends to rely). The 
obligation to give a "concise statement of basis and purpose" 
when the rule is promulgated, 5 U.S.C. § 553(c) (1982), requires 
agencies to respond to "cogent" comments made by during the 
hearing process. See A GUIDE TO FEDERAL AGENCY RULEMAKING, supra 
note 70, at 138-54; see , also , Portland Cement Ass'n v. 
Ruckelshaus, 486 F.2d 375, 493 (D.C. Cir. 1973) (agency's failure 
to respond to public comments in its statement of basis and 
purpose ground for reversal); Automotive Parts & Accessories 
Ass'n V. Boyd, 407 F.2d 330, 338 (D.C. Circ. 1968) (statement of 
basis and purpose must allow court "to see what major issues of 
policy were ventilated by the informal proceedings and why the 
agency reacted to them as it did"). 

76. In Motor Vehicle Manufacturers Association v. State Farm 
Mutual Automobile Insurance Co ., 463 U.S. 29 (1983), the Supreme 
Court held that agencies must have "adequate reasons" for their 
actions. An agency does not meet that requirement if it relied 
on factors that Congress did not intend it to consider, if it 
failed to consider "entirely" an important aspect of the problem 
it was resolving, or if it offered an explanation for its 
decision that ran counter to the evidence, or which was so 
implausible that it could not be explained as a product of a 
difference in view or of agency expertise. Id^. at 43. 

77. Compare Shapiro & Levy, Heightened Scrutiny of the Fourth 
Branch; Separation of Powers and The Requirement of Ade<^uate 
Reasons for Agency Decisions , 1987 DUKE L.J. 387 (favoring 
judicial review to enforce new requirements) with Pierce, The 
Role of Constitutional and Political Theory in Administrative 
Law , 64 TEX. L. REV. 469 (1985) (not favoring judicial review to 
enforce new requirements). 



1 14 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



hearing process. ^^ Moreover, because a few courts have 
misinterpreted these changes as inviting a highly critical scope 
of review, ^ agencies may take additional time to try to avoid 
reversal in those courts. 

OSHA must engage in hybrid rulemaking in order to promulgate 
a health and safety standard.®-^ By comparison, some agencies, 
like EPA, can promulgate some health standards by use of informal 
rulemaking. ®2 Other agencies, like FDA, use a summary judgment 
procedure to avoid holding a formal hearing in many cases. °^ 
Nevertheless, the time OSHA spends in hybrid hearings is not the 
primary cause of delay. The time elapsed during hearings is only 
a small portion of the time elapsed during OSHA decisionmaking 



78. The first few OSHA health standards, for example, occupied 
only a few pages in the federal register, while recent standards 
have occupied hundreds of pages. Compare Standard For Exposure 
to Asbestos Dust, 37 Fed. Reg. 11,318 (19 72) ; Standard For 
Carcinogens, 39 Fed. Reg. 3756 (1974); Standard for Exposure to 
Vinyl Chloride, 39 Fed. Reg. 35, 890 (1974) with Cotton Dust 
Fiber Standard, 43 Fed. Reg. 27,350 (1978); Standard for Lead, 43 
Fed. Reg. 52,952 (1978); Identification, Classification and 
Regulation of Potential Occupational Carcinogens, 45 Fed. Reg. 
5002 (1980). 

79. See , e.g. , Forging Industry Assoc, v. Secretary of Labor, 
748 F.2d 210 (4th Cir. 1984) (OSHA's hearing conservation rule 
exceeds its statutory authority) . 

80. This appears to be the situation at OSHA. See Part IIIG 
infra. 



81. 29 U.S.C. at § 655(b); see generally B. MINTZ, supra note 
50, at 61-62. 

82. See note 69 supra . 

83. See 21 C.F.R. § 12.93 (1985); see also 10 C.F.R. § 2.749 
(Nuclear Regulatory Commission's summary judgment rule); see 
resolution of Scientific Policy Questions , supra note 8, at 759- 
66 (discussing FDA summary judgment procedures). 



OSHA RULEMAKING 



115 



and judicial review. ^ For that reason, while streamlining the 
hearings would enhance OSHA's efficiency somewhat, it is not 
likely to aid the agency greatly in increasing its regulatory 
output. ^ 

A more serious problem is that the type of evidentiary 
burden imposed on OSHA appears to be greater than that of other 
agencies. The Administrative Procedure Act (APA) generally 
places the burden of proof on "the proponent of a rule."°° At 
FDA and other licensing agencies, the proponent is the 
prospective licensee and that entity must establish that its 
product is acceptable. By comparison, at OSHA and other 
standard-setting agencies, the proponent is the agency and it 
must establish that a regulation is necessary. This allocation 
has three important ramifications for OSHA. First, FDA can keep 
a product off the market in cases of scientific uncertainty, but 



84. The following chart indicates the time elapsed for the 
various components of the process: 



Standards 

Asbestos 

14 Carcinogens 

Vinyl Chloride 

Coke Oven Emissions 

Benzene 

DBCP 

Arsenic 

Lead 

Cotton Fiber Dust 

Acrylonitrile 

Noise 



Heari 



ng. 



3 days 
3 days 

6 days 
7 5 days 
22 days 

2 days 
12 days 
49 days 

7 days 
11 days 
24 days 



Agency 

Decision- 

Making 

4 mos . 
11 mos. 

5 mos. 
63 mos. 
61 mos. 

6 mos. 
51 mos. 
69 mos. 
44 mos. 
18 mos. 

100 mos. 



Judicial 
Review 

21 mos. 
10 mos. 
2 mos. 
16 mos. 
28 mos. 
none 

34 mos. 
20 mos. 

35 mos. 
none 

46 mos. 



Entire 
Process 



25 

21 

7 

7 9 mos. 
49 mos. 



6 
85 



mos. 
mos 
mos. 



mos. 
mos. 



89 mos. 

79 mos. 

18 mos. 

146 mos. 



See Responses to Occupational Disease , supra note 2, at 1305-09 
(time elapsed for agency and judicial review except for noise 
standard); PREVENTING INJURY, supra note 2, at 363 (time elapsed 
for agency and judicial review for noise standard); McGarity, 
OSHA's Generic Carcinogen Policy; Rulemaking Unclear Scientific 
and Legal Uncertainty , in LAW AND SCIENCE IN COLLABORATION 78 (J. 
Nyhart & M. Carrow eds . 1983) (time elapsed for hearings). 

85. McGarity, supra note 84, at 77. 

86. 5 U.S.C. § 556(d) (1982). 

87. Huber, supra note 17, at 1033. 



1 16 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



OSHA cannot regulate that risk until additional evidence is 
forthcoming. Second, FDA requires the regulatee to develop the 
scientific information necessary for a decision, but OSHA has 
that responsibility. Finally, firms regulated by FDA are 
harmed by regulatory delay, but firms regulated by OSHA 
benefit. Thus, OSHA enjoys less cooperation than it would if 
firms were required to obtain a license from the agency before 
they could act. 

Although the APA applies an "arbitrary and capricious" 
standard of review for most agencies, Q§HA is required to support 
its rules with "substantial evidence." As a result, it may 
have to produce more convincing evidence before it can 
regulate. ^^ Because Congress assigned that burden of proof, OSHA 
decided to engage in hybrid rulemaking, rather than the more 
expeditious informal rulemaking used by other agencies. ^^ 

OSHA has also been affected by the manner in which the 
courts have defined its burden of proof. In 1980, OSHA undertook 
a bold move to speed regulation of carcinogens, but the Supreme 
Court in effect blocked this effort. The agency had adopted a 
generic cancer policy to avoid having to resolve the same 
scientific issues in every rulemaking proceeding. ^^ The 
centerpiece of the policy was a decision to seek the lowest 
exposure feasible for any chemical that was carcinogenic in 
either animals or humans and to limit participants to certain 
types of evidence in their attempts to convince OSHA not to 



88. ^. at 1034. 

89. See note 18 supra and accompanying text. 

90. See notes 16-17 supra and accompanying text. 

91. Compare 5 U.S.C. § 706(2)(A) with 29 U.S.C. § 655(f) 
(1982). 

92. See R. PIERCE, S. SHAPIRO, & P. VERKUIL, supra note 32, at 
§ 7.3. Some argue, however, there is little or no difference 
between how courts administer the two standards of review. Id . 

93. B. MINTZ, supra note 50, at 62. 

94. Final Rule, Identification, Classification and Regulation 
of Potential Occupational Carcinogens, 45 Fed. Reg. 5002 (1980) 
codified at 29 C.F.R. §§ 1990.101 - .152 (1982) (as amended). 
OSHA's rationale was that the "existing case-by-case approach, 
with its constant re-examination of already resolved scientific 
and policy issues, does not permit regulation of such substances 
in a timely and efficient manner." Id. at 5002. 



OSHA RULEMAKING 117 



follow that generic policy. ^ The agency, however, withdrew 
these rules after the Supreme Court's decision in Industrial 
Union Department v. American Petroleum Institute (frequently 
referred to as the Benzene case). 

In the Benzene case, the Court held that Congress had not 
delegated to OSHA the authority to decide how the proceed if 
sufficient information about how dangerous a chemical might be 
did not exist. ^^ A plurality of the Court held that OSHA could 
promulgate a standard only if the agency first had proven that 
the change was "necessary and appropriate to remedy a significant 
risk of material health impairment." For the benzene standard 
under review, the plurality concluded that OSHA did not have any 
evidence to support a finding of "significant risk." They 
rejected OSHA's explanation that since no safe level of benzene 



exposure could be calculated, the only prudent course was i 
the lowest exposure level that was feasible. ^° In a later 



to seek 
ixposure levei tnat was reasiDie.'- in a lacer case, 



the entire Court confirmed that OSHA was required to prove that 
workers face a "significant risk" before it can promulgate a 
regulation limiting exposure to a chemical. ^^ 

After the Benzene case, it is unclear whether OSHA can use 
generic regulations that would avoid the time-consuming, case-by- 
case adversarial confrontations which have slowed agency 
rulemaking. If OSHA must hold a separate hearing on significant 
risk for every chemical that it regulates, the agency is unlikely 
to be able to act on very many of the hundreds of chemicals that 
may require regulation. 



95. 45 Fed. Reg. at 5283-84, 5286-87 



96. 448 U.S. 607 (1980); see Final Rule, Identification, 
Classification and Regulation of Potential Occupational 
Carcinogens, Conforming Deletions, 46 Fed. Reg. 4889 (1981) 
(codified at 29 C.F.R. § 1990) (deletion of inconsistent 
provision) . 

97. 448 U.S. at 652-53 (Act authorizes OSHA to promulgate 
health and safety standards only when agency can show, on the 
basis of substantial evidence, that significant risk of harm 
exists) . 

98. 2i- ^t 631-32, 635 n.38, 639-40, 667. 

99. See American Textile Mf gs . v. Donovan, 452 U.S. 490, 505 
n.25 (1981) (OSHA determined that exposure to cotton dust 
presented a significant health hazard). 

100. The question of whether OSHA must hold a separate hearing 
will be addressed in a forthcoming reports for ACUS. 



1 18 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



4. Political Constraints 

One final constraint on agencies is the political nature of 
their work. Regulatory decisions are normally controversial 
because they affect Congress, the White House, and various 
interest groups. ^'^■'^ Interest groups are affected because 
decisions cause a redistribution of wealth, often millions of 
dollars, from the regulated industry to consumers or other 
beneficiaries of regulation. ■'■^^ Congress and the White House are 
affected because agencies make choices about economic and social 
priorities in which elected officials have a great interest. ^ 
Agencies interact with these parties because each can influence 
the agency's ultimate success or failure. '^ 

Regulatory decisions are also controversial because they 
involve difficult moral and philosophical choices. No society 
has sufficient resources to protect its citizens from all 
dangers. As a result, agencies inevitably are faced with 
"tragic choices" concerning which persons will be protected and 
which will not. These choices must be informed by social 
values and they will affect the maintenance of those values. 
Wide disagreement over which values should control these 
decisions makes them all the more dif f icult . ^"^ ' 

During most of OSHA's existence, it has been embroiled in 
political controversy with industry, labor, the White House and 
Congress. Although all agencies have their share of such 



101. See Pierce & Shapiro, Political and Judicial Review of 
Agency Action , 59 TEX. L. REV. 1175 (1981). 

-- -- _tegu- 

OF REGULATION 358-72 (J. Wilson, ed . 1980). 

103. See Pierce & Shapiro, supra note 102, at 1195-1200, 1211- 
13. 

104. See J. CHUBB, INTEREST GROUPS AND THE BUREAUCRACY; THE 
POLITICS OF ENERGY 18-57 (1983). 

105. See G. CALABRESI & P. BOBBITT, TRAGIC CHOICES (1978). 

106. See M. DOUGLAS & A. WILDAVSKY, RISK AND CULTURE: AN ESSAY 
ON THE SELECTION OF TECHNICAL AND ENVIRONMENTAL DANGERS (1982). 

107. See Schroeder, Rights Against Risk , 86 COLUM. L. REV. 495 
(1985). 



OSHA RULEMAKING 1 19 



controversy, OSHA has more than the others. -'■^° 

OSHA is guaranteed an unusual amount of political 
controversy because its actions significantly affect both 
business and labor and most decisions favoring one group will 
disfavor the other. Attempts to reconcile business and labor are 
hampered by the long history of antagonism between those 
groups. Thus, OSHA has almost continually been attacked by 



108. See G. WILSON, THE POLITICS OF SAFETY AND HEALTH: 
OCCUPATIONAL SAFETY & HEALTH IN THE UNITED STATES & BRITAIN 151 
(1986) (The "dominant feature of the politics of safety and 

health in the USA has been conflict."); Interview with Dorothy 
Strunk, Counsel, House Comm. on Education and Labor, in 
Washington, D.C. (Oct. 31, 1986) (OSHA is the "most politicized 
agency in Washington" ) . 

109. Levin, Politics and Polarity; The Limits of OSHA Reform , 
REGULATION, Nov. /Dec. 1979, at 34 ("CT]he whole bitter nature of 
U.S. labor history — the mutual distrust, management's desire to 
run its business with minimal interference, labor's belief that 
employers cannot be trusted to do 'right things' without a gun at 
their heads — has been loaded on OSHA."); Thompson, Deregulation 
by the Bureaucracy; OSHA and the Augean Quest For Error 
Correction , 42 PUBLIC ADMIN. REV. 202, 205 (1982) (cited 
hereinafter as Augean Quest ) (conflict between business and labor 
is particularly bitter because each group views agency decisions 
as "addressing values of the most fundamental importance" and 
each sees the other as "a long-term enemy of many of its most 
basic value commitments"); see S. KELMAN, REGULATING AMERICA, 
REGULATING SWEDEN; A COMPARATIVE STUDY OF OCCUPATIONAL HEALTH AND 
SAFETY POLICY (1981) (American history of labor strife affects 
how OSHA can regulate) . 



120 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



business for overregulation|^r* and by labor and public interest 
groups for underregulation. Because business and labor are 
affected, their allies in Congress are critical of the 
agency. ^ Finally, OSHA has been the subject of White House 



110. OSHA was attacked in its early years for "Mickey Mouse 
standards" such as specifying split toilet seats or forbidding 
ice in drinking water. Kelman, Occupational Safety & Health , in 
THE POLITICS OF REGULATION 258 (J. Wilson ed . 1980) . Most of 
these regulations were adopted pursuant to a Congressional order 
that the agency adopt as its own regulations existing, voluntary 
industry health and safety standards. See note 37 supra and 
accompanying text. OSHA adopted these regulations without 
culling out those that were silly thereby opening itself for 
political attack by business and their political allies. F. 
THOMPSON, supra note 48, at 231-35; Kelman, supra , at 259. In 
later years, business criticism focused on the high compliance 
costs imposed by OSHA health regulations. Kelman, supra note 89, 
at 259; see generally Szasz, Industrial Resistance to 
Occupational Safety and Health Legislation; 1971--1981 , 32 SOCIAL 
PROBLEMS 104 (1984) (industry has resisted OSHA initiatives by 
seizing on popular support for deregulation of costly regulatory 
problems) . 

111. See , e.g. , J. CLAYBROOK, RETREAT FROM SAFETY: REAGAN'S 
ATTACK ON AMERICA'S HEALTH 113 (1984) (report by staff of Public 
Citizen) (OSHA has "diligently rolled back what health and safety 
protections it could on behalf of its business allies" by 
"backdoor administrative ploys and evasive rhetoric."); Bargmann, 
OSHA; The Urgency For Revival , AFL-CIO AMERICAN FEDERATION, June, 
1977 ("urgent reform" of OSHA necessary for it to reach its "full 
potential" ) . 

112. F. THOMPSON, supra note 48, at 229; Jones & Keiser, U.S. 
Senate Voting of Health and Safety Regulation; The Effects of 
Ideology and Interest-Group Orientations , 6 HEALTH POLICY 3 3 
(1986); see Levin, Politics and Polarity; The Limits of OSHA 
Reform , REGULATION, Nov. /Dec, 1979, at 33 (from 1973-76 Congress 
held over one hundred oversight hearings concerning OSHA); but 
see Telephone interview with Richard Lawson, Counsel, Senate 
Comm. on Labor (October 22, 1986) (No Senate oversight of OSHA 
from 1980 - 1986 to allow agency to solve its programs without 
interference) . 



I 



OSH A RULEMAKING 1 2 1 



efforts to have agencies become more cost conscious. "^ 

The high level of controversy has had several debilitating 
effects on OSHA. First, Congress made so many political 
compromises when it passed legislation to establish OSHA that the 
agency lacked the organizational coherence, power, and resources 
necessary to do an effective job. A good example of this 
problem, discussed earlier, was the decision to locate NIOSH in a 
different executive department. Another example is that 
Congress subjected OSHA to a "substantial evidence" scope of 
review, rather than the "arbitrary and capricious" standard used 
under the APA to review agency rulemaking .•'■■'■ ° Second, almost 
every health decision has been challenged in the courts. As a 
result, OSHA engages in a lengthy preparation process in order to 



113. F. THOMPSON, supra note 48, at 225-26. Some have claimed 
that health regulations have been a particular target of the 
Reagan Administration. See , e.g. , HOUSE SUBCOMM. ON OVERSIGHT 
AND INVESTIGATIONS OF THE COMM. ON ENERGY AND COMMERCE, 0MB 
REVIEW OF CDC RESEARCH: IMPACT OF THE PAPERWORK REDUCTION ACT, H. 
Rep. No. 99-MM, 99th Cong., 2d Sess. (1986) (0MB has 
discriminated against the collection of data for environmental 
and health regulations.) Other Presidents, however, have also 
failed to support OSHA or have attempted to limit its actions. 
See G. WILSON, supra note 108, at 161 (description of anti-OSHA 
efforts of Presidents Nixon, Ford and Carter). Whether or not 
OSHA has been singled out, 0MB review of regulations have become 
highly controversial. See Morrison, 0MB Interference With Agency 
Rulemaking; The Wrong Way To Write Regulations , 9 9 HARV. L. REV. 
1059 (1986). 

114. Levin, supra note 112, at 36-37; Telephone Interview with 
Sy Holtzman, Deputy Staff Director, Subcomm. on Health of the 
House Comm. on Education & Labor (Oct. 21, 1986). 

115. See notes 46-48 supra and accompanying text. 

116. See Associated Industries v. Department of Labor, 487 
F.2d 342, 347-50 (2nd Cir. 1973) ("substantial evidence" standard 
result of Congressional compromise) . 

117. Business has sought review for all but four of OSHA' s 
eighteen health standards. See PREVENTING INJURY, supra note 2, 
at 363; Responses To Occupational Disease , supra note 2, at 1305- 
09. Moreover, labor and public interest groups have continually 
sued OSHA for failure to issue regulations. See Part IIA2 infra ; 
Responses To Occupational Disease , supra note 2, at 1263. 



122 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



defend itself. ■'•^^ Third, the agency has lacked sufficient 
legitimacy to gain popular support for its actions. As a result, 
it has very little political protection from its critics. •'•^^ 
Finally, industry and labor have vigorously blocked consideration 
of legislative reforms that might make OSHA's job easier. Each 
has been too fearful that the other could obtain congressional 
approval of reforms disadvantageous to itself. ■'■^^ 

B. The Possibility of Reforn 

In light of the previously discussed difficulties, it is 
remarkable that OSHA has accomplished as much as it has. 
Nevertheless, it is clear that much remains to be done. 
Knowledgeable observers are generally pessimistic about the 
possibility of reform at OSHA and even optimists are rather 
guarded in their hopes. 

Great caution is certainly appropriate. The previous 
discussion reveals the complexity of problems faced by OSHA. 
Moreover, reform of an ongoing agency is actually more difficult 
than building a regulatory system from the ground up. Revisions 
will be opposed not only by those who perceive they will be 
disadvantaged, but even by those who might benefit because they 



118. See Part II IG infra and accompanying text. Moreover, in 
the late 1970s all OSHA decisionmaking was brought to a halt 
while OSHA awaited the outcome of a series of important court 
cases. Viscusi, The Status of OSHA Reform; A Comment on 
Mendelhoff's Proposals , 5 J. POLICY ANALYSIS & MANAGEMENT 469, 
471 (1986). 

119. See Levin, Politics and Polarity: The Limits of OSHA 
Reform , REGULATION, Nov. /Dec, 1979, at 39 (public's commitment 
to job safety and health does not run deep and wide enough to 
make the subject a top national priority); Harter, suyra note 60, 
at 34 (OSHA has little political support). By comparison, 
agencies like FDA enjoy broad popular support because they 
resolved years ago the type of intense political problems that 
currently plague OSHA. Telephone Interview with Donald McLearn, 
Special Asst. to the Director, Bureau of Drugs, FDA (Oct. 16, 
1986) . 

120. See Interview with Dorothy Strunk, supra note 108 (No 
constituency for legislative reform because both labor and 
industry perceive they would be worse off); Telephone interview 
with Sy Holtzman, supra note 114 (Oct. 21, 1986) (OSHA supporters 
"afraid" that if new legislation was considered, the agency would 
be "substantially weakened"). 



OSHA RULEMAKING 123 



prefer the "devil they know" to any future uncertainty . ^^-^ 
Finally, groups representing labor, management, physicians, other 
health professions, and public interest organizations perceive 
the need for change according to their professional 
orientations. Because each group differs in orientation, OSHA 
reform is "contested terrain" between them. 

With these realities in mind, this report examines two types 
of possible reforms. Part II considers the importance and 
advantages of a better priority-setting system at OSHA. Part III 
evaluates new methods of management. 



121. See Harter, supra note 60, at 38 ("largest obstacle" to 
reform at OSHA is the opposition of those with a vested interest 
in the status quo); Levin, supra note 112, at 39 (Those who have 
learned to use present system may prefer "the devil they know"). 

122. Interview with Karl Kronenbush, Office of Technology 
Assessment, in Washington, D.C. (Oct. 31, 1986). 



124 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



II. Prioritization. 

If OSHA continues to do business as it has in the past, it 
has sufficient resources to pursue actively about 15-20 major 
rulemaking efforts at any given moment .^-^-^^ Further, given 
current resource constraints and a 4-8 year gestation period 
for most rules, OSHA has the capacity to take on only about 2-5 
new projects in any single year. How OSHA chooses new projects 
from among the thousands of conditions that create potentially 
hazardous workplaces is a matter of no small importance to the 
agency, the regulated industries, and workers. Each new 
Administration at OSHA seems to revisit this question at least 
once.-*-^-^^ 

In 1983, then-Assistant Secretary Auchter told a House 
subcommittee that OSHA rulemaking had been "a random process" 
in which "priorities were constantly re-juggled and whoever 
screamed the loudes<- got the action . "^-^-^'' That 
characterization applies equally well in 1987. There are 
presently at least nine sources of rulemaking initiatives that 
vie for OSHA ' s attention as it attempts to establish a 
rulemaking agenda: OSHA's own systematic prioritization 
efforts; worker and consumer group petitions; congressional 
demands for action; pressure from the White House and 0MB; 
referrals from EPA pursuant to The Toxic Substances Control 
Act; NIOSH criteria documents; private standard-setting 



professionals to devote to rulemaking activities. 
Martonik Interview, supra note 59. That Directorate is 
currently working on about 17-18 projects, but many of 
these are small and some are winding down. The Safety 
Standards Directorate has approximately 20 effective 
professionals. B. White Interview, supra note 59. One 
long-time health scientist in the Health Standards 
Directorate estimates that at current staffing levels, 
OSHA is only capable of working effectively on six or 
seven standards at any one time. Telephone interview 
with Edward Stein, Directorate of Health Standards 
Programs, OSHA (October 21, 1986). A member of the 
Policy Directorate put the number at 9-10 health 
standards. Telephone Interview with Larry Braslow, 
Supervising Economist, Directorate of Policy, OSHA 
(October 24, 1986) . 

Wrenn Interview, supra note 49. 

BNA Occupational Safety and Health Reporter, May 5, 1983 
at 1043. See Delays in Setting Standards, supra note 49 
(relating inability of NIOSH and OSHA to set priorities) 



OSHA RULEMAKING 125 



agencies like ACGIH and ANSI; information collected from the 
field; and developments in the states and other countries. 

Ideally, OSHA should channel all of these sources into its 
own agenda-setting mechanism to establish a realistic set of 
priorities for the near term. In prioritizing projects related 
to safety standards, OSHA comes close to achieving this ideal. 
Most of OSHA's safety standard work consists of reviewing and 
updating existing standards .-*-^-^^ The agency agreed several 
years ago to review all of its existing safety standards within 
ten years and to set new standards where the old ones were out 
of date. The Safety Standards Directorate has been 
methodically proceeding down a list of existing standards. 
When a need for a new standard arises, as in the case of grain 
elevators and Bhopal-like chemical leaks, the Directorate 
simply amends its priorities sub silentio to allow the new 
project to take the place of some pending pro ject .-^^-^^ 

The situation is starkly different for health standards. 
There are literally thousands of substances in American 
workplaces that are regulated, if at all, only by the consensus 
standards that OSHA promulgated in 1971. Most experts agree 
that the old consensus standards, without more, are not 
adequate to provide safe and healthful workplaces, and OSHA 
acknowledges that it has much work to do in the health area. 
But OSHA has no agenda-setting process at all for health 
standards. In reality, its priorities are determined in an ad 
hoc fashion by outsiders. Virtually every knowledgeable 
observer of the OSHA rulemaking process, from both inside and 
outside the agency, agrees that this is a sorry state of 
affairs that is badly in need of correction. There is less 
agreement, however, on how OSHA should go about regaining 
control over its own agenda .-'-^-^^ 

A. Sources of agency priorities. 

1. Systematic Agency Priority-Setting. 

OSHA's one attempt to rank priorities systematically was 
its 1979 carcinogen policy, which contained a scheme for 
ranking substances that showed indications of carcinogenicity. 
The agency screened about 200 substances and attempted to rank 



12 7/ 



B. White Interview, supra note 59. 

B. White Interview, supra note 59; Telephone interview 
with George Henshel, Department of Labor, Office of the 
Solicitor (October 28, 1986). 



standards, the following discussion will focus on those 
standards and generally ignore safety standards. 



126 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



1 2 9 



them according to exposure, quality of data, and potency 
This effort generated a great deal of controversy among 
regulatees, and it was abandoned after the Fifth Circuit stayed 
the Carcinogen Policy. According to one observer of this 
effort, its candid, highly public nature spelled its doom. 
Once the agency placed individual substances on the list, 
employers who used those substances were willing to expend 
substantial resources challenging the prioritization effort. 
Given the large uncertainties in setting priorities for 
carcinogens, it was relatively easy to make plausible arguments 
that OSHA had misranked the chemicals on the list. OSHA 
ultimately abandoned the attempt. 

The carcinogen policy experience should not, however, 
cause OSHA to abandon systematic priority-setting; nor is it a 
reason to hide it behind closed doors. As we shall see later 
in this section of the Report, the agency can systematically 
set priorities if the reviewing courts are educated about the 
difficulties of setting priorities in areas of great 
uncertainty and if the agency adopts a process that will allow 
it to make prioritization decisions without becoming paralyzed 
by the predictable complaints of economically interested 



1 2 9 



26 C.F.R. §§1990, 131-33, 45 Fed. Reg. 5002 (1980). 
Telephone Interview with Charles Gordon, Department of 
Labor, Office of the Solicitor (October 23, 1986); Stein 
Interview, supra note 123. According to the policy OSHA 
was to take the following factors into account in ranking 
candidates for regulation: 

(1) The estimated number of workers exposed; 

(2) The estimated levels of human exposure; 

(3) The levels of exposure to the substance which 
have been reported to cause an increased incidence 
of neoplasms in exposed humans, animals or both; 

(4) The extent to which regulatory action could 
reduce not only risks of contracting cancer but also 
other occupational and environmental health hazards; 

(5) Whether the molecular structure of the 
substance is similar to the molecular structure of 
another substance which meets the definition of a 
potential occupational carcinogen; 

(6) Whether there are substitutes that pose a lower 
risk of cancer or other serious human health 
problems, or available evidence otherwise suggests 
that the social and economic costs of regulation 
would be small; and 

(7) OSHA will also consider its responsibilities 
for dealing with other health and safety hazards and 
will consider the actions being taken or planned by 
other governmental agencies in dealing with the same 
or similar health and safety hazards. 

26 C.F.R. § 1990. 132 (1986) . 



OSHA RULEMAKING 127 



entities. Nevertheless, the vehemence with which employers 
rejected OSHA's first attempt to draft a priorities list has 
made the agency chary of public priority-setting, and it has 
not in the intervening years attempted any similar projects. 

2. Rulemaking Petitions. 

The most frequent source of OSHA rulemaking initiatives 
during the last five years has been petitions from unions and 
public interest groups. In the typical pattern, a new 
scientific study indicating that a common workplace substance 
may be hazardous is reported widely in the press .-'-^-^^ An 
agency spokesman says that the agency is concerned and is 
looking into the matter. The Assistant Secretary instructs the 
Health Standards Directorate to study the issue, and the matter 
quickly loses its previous visibility. 

Months or years pass without a formal agency response 
until a union or public interest group petitions the agency 
(usually with great fanfare) to set an emergency temporary 
standard and promulgate a notice of proposed rulemaking (NPRM) . 
The agency agrees to consider the matter by a certain date, and 
the petition is referred to the staffer who was originally 
assigned the issue. The matter then assumes a much higher 
priority for that staffer, who now pulls together an ad hoc 
work group to prepare the agency's response to the petition. 

The deadline passes. After several months, the petitioner 
(again with much fanfare) files suit in a district court 
demanding that the agency respond to the petition within a 
reasonable time. The agency responds by denying the allegation 
that it has unreasonably delayed things, but since it has only 
promulgated approximately two major rules in the last six 
years, it recognizes that it will have a difficult time 
demonstrating that it is really too busy. It therefore 
attaches to its response a proposed schedule for completing its 
consideration of the petition. In deference to the agency, the 
court accepts the agency's response, but retains jurisdiction 
with a warning that the court will not hesitate to intervene to 
correct any further delays. 

Further delays occur, and the agency slips from the 
court-adopted schedule. The petitioner returns to court and 
secures a court order requiring OSHA to promulgate the proposed 
rule by a certain date or risk being held in contempt of court. 



3 0/ 



The following description is intended to raise the 
general problems of OSHA's response to petitions. 
Although it may not precisely describe the process of 
responding to any particular petition, it is a fairly 
accurate composite description of several petitions, 
including asbestos, benzene, ethylene oxide, field 
sanitation, and formaldehyde. 



128 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Finally, the agency rushes out with a rule just before the 
final court-ordered deadline. 

Perhaps the greatest advantage of the outside petition as 
an agenda-setting device is its potential to hold the agency 
accountable to its beneficiaries. Absent the petition tool, 
the agency feels greater pressure from regulatees. Since 
virtually every OSHA health standard is challenged in court, 
the agency is understandably reluctant to initiate a rulemaking 
action until it is very certain that it can create an 
administrative record capable of withstanding careful judicial 
scrutiny. Without some pressure emanating from regulatory 
beneficiaries, the agency will be very selective in choosing 
rulemaking topics. The petition device with the underlying 
threat of a "bureaucracy forcing" lawsuit reminds the agency 
that delay in initiating rulemaking also has its costs, not the 
least of which is the agency's loss of control over its own 
agenda. Many representatives of beneficiary groups firmly 
believe that if it were not for the threat of a lawsuit, OSHA 
would never decide to take up difficult and controversial 
projects .-^-^-^^ And a surprising number of health 
professionals in the Health Standards Directorate agree with 
this assessment. 

Another argument favoring the petition device is that 
workers may be in a better position to understand workplace 
risks than the agency professionals and contractors. Adhering 
to the principle that the squeaky wheel is most in need of oil, 
some agency officials are content to let beneficiaries play a 
very large role in setting the agency's agenda. The necessary 
corollary is that workplaces about which the agency does not 
receive petitions must be reasonably safe. 

Finally, as a practical matter, in our pluralistic 
participatory democracy, it is not politically realistic to 
maintain that beneficiary groups should not play a strong role 
in agency agenda-setting .^-^-^'' The traditional argument that 
the agency is the best representative of beneficiary interests 
is no longer tenable in a post-Nader era. The agency may be in 
the best position to balance the competing interests of 
industry and worker, but OSHA is clearly not an agent for labor 
alone . 

To maintain that beneficiary groups should play a role in 
agency agenda-setting through the petition process is not, 
however, to conclude that, beneficiary groups should dominate 



^-^-^'' Telephone Interview with Margaret Seminario, Assistant 

Director, Department of Occupational Safety, Health, and 
Social Security, AFL-CIO (November 4, 1986). 

■^-^-^^ See generally, Luneburg, Petitions for Rulemaking: 
Federal Agency Practice and Recommendations for 
Improvement, Report to the Administrative Conference of 
the United States (1986). 



OSHA RULEMAKING 129 



that process. Although few would argue that past petitions 
have addressed unimportant issues, it is in many cases 
debatable whether beneficiaries understand workplace hazards 
better than agency professionals, especially when those hazards 
are subtle and chronic in nature. No individual petitioner is 
likely to have the expertise necessary to assess comparative 
risks across a broad spectrum of occupations to determine which 
workers are most in need of protection. Pitting beneficiary 
groups against one another for access to limited agency 
rulemaking resources will not necessarily result in a set of 
priorities that has the potential to provide the greatest 
degree of protection to workers in general. Indeed, relying 
exclusively on petitions to set agency priorities would 
probably force the agency to give less attention to the 
workplace conditions of unorganized workers .-^-^^'' 

In sum, while it is obvious that any agenda-setting 
mechanism that OSHA develops should be capable of seriously 
addressing outside petitions, that device should also be 
capable of rejecting such petitions. Yet OSHA cannot credibly 
reject a petition until it is in a position to say to the 
petitioner: "Your petition has merits, and we will fully 
investigate the hazards that you bring to our attention. But 
for now other higher priority matters command our full 
attention." And the agency cannot credibly make this statement 
until it can point to some consistent system for ranking 
potential agency initiatives and until it can demonstrate that 
it is expeditiously addressing projects on its current 
agenda. ^-^^^ OSHA presently lacks a prioritization plan, and 
it tends to study petitions interminably for lack of any way to 
decide whether the topic the petition addresses is more 
important than projects that it is currently pursuing. This 
paralysis persists until the agency is forced to respond to a 
judicial challenge to its indecision. Lacking a 
priority-setting process, OSHA does not have a credible 
response to ad hoc petitioners in such challenges. 

It is only the good sense and self-restraint of 
petitioners that has prevented OSHA from becoming overwhelmed 
with petitions, each of which appears meritorious when 
considered in a vacuum. But a recent increase in the frequency 



13 3 



Telephone interview with Dr. Imogene E. Sevin, 
Directorate of Health Standards Programs, OSHA (November 
3/5, 1986); Henshel Interview, supra note 127. The 
history of the efforts of relatively poorly organized 
agricultural workers over the last ten years to persuade 
OSHA to promulgate a field sanitation standard, however, 
argues against the conclusion that less organized workers 
will have less access to the agenda setting process. 

Telephone interview with Arthur Sampson, Kirkland & Ellis 
(October 24, 1986) . 



130 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



of petitions and the recent surge in referrals from EPA suggest 
that the agency must act quickly to protect its limited 
rulemaking resources .-^-^-^^ OSHA badly needs a process for 
setting priorities that is responsive to outside petitions, but 
not driven by them. 

3. Congressional Pressure 

While the threat of being held in contempt of court is an 
undoubted spur to administrative activity, the threat of being 
on the receiving end of a critical congressional investigation 
can prove equally motivating. For example, OSHA's efforts to 
regulate ethylene dibromide (EDB) were in large part a result 
of congressional pressure. The studies showing that EDB caused 
cancer in laboratory animals had been around for years when 
state officials began to detect EDB residues in food. Although 
residues in food were not directly relevant to worker health, 
investigations soon revealed that some workers were being 
exposed to much higher levels of EDB than consumers of food. 
Congressional pressure soon mounted for OSHA to do something 
about worker exposure to EDB, and OSHA reacted by giving EDB a 
much higher priority. 

Congressional pressure can also motivate the agency to 
give a rulemaking initiative less priority than it might 
otherwise have. For example, a safety initiative for the oil 
and gas industry has been percolating within OSHA for several 
years, and many safety experts agree that it could yield 
significant health benefits. Most agency officials, however, 
believe that as long as the oil and gas industry continues its 
current decline, it will not be politically feasible to 
promulgate an oil and gas safety standard. 

Like court action, congressional interest usually 
originates from complaints of beneficiary groups about agency 
inaction. In some cases, however, congressional committees are 
more successful at probing the reasons for agency inaction than 
courts. Because they often have access to disgruntled agency 
staff, congressional committees may not accept agency excuses 



■^-^-^"^ The experience of the Consumer Product Safety Commission 
(CPSC) under a now-defunct provision of the Consumer 
Product Safety Act suggests that inundation is a very 
real possibility. Section 10(e) of the Act, 15 U.S.C. 
§2059(e) (repealed 1981), required CPSC to respond to 
petitions within 120 days. Failure to respond could 
result in a bureaucracy-forcing lawsuit in district court 
in which the question whether the product's risks crossed 
the statutory threshold was tried de novo. In its first 
three years CPSC was inundated with two hundred 
petitions. Schwartz, The Consumer Product Safety 
Commission: A Flawed Product of the Consumer Decade, 51 
Geo. Wash. L. Rev. 32, 47 (1982). 



OSHA RULEMAKING 131 



at face v^lue. In addition, a congressional committee is not 
as likely as a district court to be persuaded by the agency's 
good faith claims and its offer to set itself on a mandatory 
schedule. Congressional investigations may attract more media 
attention than judicial actions. Finally, unlike the interest 
groups that ask courts to set the agency's agenda. Congress can 
legitimately claim to represent the broad public 
interest .^^-^^ 

One significant disadvantage of congressional pressure as 
an agenda-setting mechanism is its highly political nature. 
Some congressmen may not be as concerned with inducing OSHA to 
action as they are with attracting media attention to 
themselves and in criticizing the opposing party. Most 
knowledgeable congressmen and staff know that scientific 
rulemaking is an arduous process that should not lightly be 
undertaken. But sometimes the opportunity to score easy 
political points at the agency's expense proves irresistible. 

Congress also lacks sufficient technical expertise to be 
able to divine which rulemaking topics should have precedence 
over others. More than most institutions. Congress is 
susceptible to the "chemical-of-the-month syndrome," under 
which the agency is forced to undertake intense scrutiny of new 
topics on an ad hoc basis as new evidence reaches the media. 
While this faddish approach to prioritization may satisfy the 
press and particular interest groups, it is not likely to meet 
a neutral scientist's worst-first test. The agency may find 
itself chasing after high-visibility, low-risk subjects, while 
low-visibility, high-risk topics go unaddressed .^-^-^'' 

In the highly political atmosphere in which a modern 
regulatory agency finds itself, political considerations must 
necessarily play a role in setting its priorities. But OSHA's 
statutory goals are not best advanced by an agency that is 
blown by the political winds without any moorings of its own. 
OSHA will always face strong congressional pressure to 
undertake particular rulemaking activities and to resist 
others, and in a democratic society the agency should be 
responsive to those pressures. But this does not imply that 
OSHA should not have its own agenda. While the agency might 



36/ 



This argument in favor of congressional pressure must, 
however, be qualified by the observation that a single 
subcommittee is not necessarily representative of a broad 
public consensus. Indeed, congressmen often select 
committees because of the interests of particular 
constituent groups. Nevertheless, congressional 
investigations probably do represent a broader 
constituency than the interest groups that file 
bureaucracy-forcing lawsuits. 

Pierce and Shapiro, supra note 35, at 1201; Vladeck 
Interview, supra note 17. 



132 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



well craft a device for elevating particularly "hot" issues to 
the top of its agenda, it must also have a mechanism for 
resisting congressional pressure when sound analysis reveals 
that OSHA's severely limited resources could better be used in 
other efforts. 

4. White House and 0MB Pressure. 

OSHA is an executive agency; its leadership serves at the 
pleasure of the President. Like Congress, the White House is 
sensitive to political constituencies, and like congressional 
pressure, presidential pressure can be highly motivating. For 
example, although OSHA had, after many years of intense effort, 
promulgated standards for lead and cotton dust and had 
successfully fended off most court challenges, the new 
Administration in 1981 developed a "hit list" of regulations 
that it wanted the agency to re-examine that included the lead 
and cotton dust standards. OSHA then devoted substantial 
resources over the next few years to an intense revisiting of 
the same issues that it had only very recently studied.-^-^-^^ 
The efforts did not, in the final analysis, result in any 
significant weakening of the existing standards .-^-^-^'' 

White House pressure can also induce OSHA to promulgate 
new rules. Although 0MB initially demanded that OSHA withdraw 
a proposed rule requiring certain employers to inform employees 
of workplace hazards after it was rushed to the Federal 
Register in the waning hours of the Carter Administration, 
business groups began to urge the White House to pressure OSHA 
to promulgate a new rule that would preempt state and local 
regulations that were blossoming around the country. OSHA 
reacted to this pressure by proposing a revised hazard 
identification regulation that has now become a final 
rule .-^-^-^'^ Similarly, under 0MB pressure, OSHA promulgated a 
standard that eliminated a burdensome recordkeeping requirement 
in a brief 12-month period.^-^^-^^ 

0MB can also affect OSHA's priorities from the opposite 
direction by discouraging the agency from putting particular 
issues on its rulemaking agenda. Executive Order 12498 



1 3 8 



3 9/ 



Gordon Interview, supra note 129; Telephone interview 
with Susan Harwood, Health Scientist, Office of Risk 
Assessment, Directorate of Health Standards Programs, 
OSHA (October 21, 1986). 

In 1985, OSHA promulgated some weakening revisions to the 
cotton dust standard, 50 F.R. 51120 (1985), but they did 
not substantially change the standard. 



F. White Interview, supra note 59. 



OSHA RULEMAKING 133 



requires that virtually all significant rulemaking initiatives 
appear in the Administration's Regulatory Program. In 
practice, to place an item in the Regulatory Program, an agency 
must persuade 0MB of the project's virtue. If 0MB does not 
agree, the item does not appear on the Administration's agenda 
and, under the terms of the Executive Order, it may not be 
placed on the agency's own agenda. For example, one of the 
reasons that OSHA's recent attempt to formalize a standard to 
address Bhopal-like chemical leaks has not gone forward is 
0MB ' s resistence to placing the project on the Administration's 
agenda .-^-^^^ 

Presidential pressure has many of the same advantages and 
disadvantages of congressional pressure, and they will not be 
repeated here. One significant difference, however, is that 
White House and 0MB pressure has been considerably less visible 
than congressional pressure. While congressmen score political 
points through high visibility investigations, the White House 
can score political points through quiet intervention into 
ongoing rulemaking activities .-'-^^^ Moreover, there is some 
reason to believe that 0MB and White House pressure originates 
outside of the government. For example, the Vice President's 
Task Force's "hit list" was largely based on suggestions from 
the regulated industries. 

It is somewhat more controversial to suggest that OSHA 
should have a mechanism for responding to pressure from the 
White House, which, after all, represents the agency's ultimate 
boss. Yet if the agency's goal is truly to provide the most 
protection to workers with the least consumption of industry 
and administrative resources, it must be prepared to tell 0MB 
that other matters command its full attention just as it must 
be prepared to give the same bad news to congressional 
committees. At the very least OSHA must be prepared to explain 
to Congress and possibly to reviewing courts why topics forced 
upon it by 0MB or the White House should command greater 
attention than the topics identified by petitioners, 
congressional staff and EPA. 

In sum, while the intensity of congressional and 
presidential desires should be a factor in OSHA's ranking 
system, it needs a system that responds to other factors, if 
for no other reason than the fact that congressional and 
presidential preferences are often quite inconsistent. 



1 4 2 



Telephone Interview with Mike Wright, Director of Safety 
and Health, United Steelworkers (October 24, 1986). 

See, e.g., Houck, President X and the New (Approved) 
Decisionmaking, 36 Am. U. L. Rev. 1 (1987); House Comm. 
on Environment and Public Works, 99th Cong., 2d Sess., 
Office of Management and Budget Influence on Agency 
Regulations (Comm. Print 1986) . 



134 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



5. TSCA Referrals. 

The Toxic Substances Control Act empowers the 
Environmental Protection Agency to require manufactures of new 
and existing chemicals to test those chemicals for toxicity and 
to submit information concerning human exposure to those 
chemicals. Upon receiving information indicating that a 
chemical or mixture of chemicals poses an unreasonable risk to 
humans or the environment, EPA may issue a rule regulating the 
production, distribution and use of the chemical. 
Alternatively, under section 9 of TSCA, if there is a 
reasonable basis to conclude that a chemical will present an 
unreasonable risk and if EPA determines that "such risk may be 
prevented or reduced to a sufficient extent by action" taken by 
another agency, EPA may submit a report to that agency 
detailing the risk. The report must request the receiving 
agency to determine if the risk may be reduced to a sufficient 
extent by that agency and, if so, to issue an order "declaring 
whether or not the activity . . . presents such risk" and to 
respond to EPA within a deadline set by EPA that is greater 
than 90 days.^^^^ 

At one time EPA entertained the possibility of assuming a 
major role in regulating workplace hazards, because its 
authority to regulate specific aspects of a chemical's use in 
the workplace is in many ways broader than OSHA's 
authority .-^-^^^ But under substantial prodding by 0MB, EPA 
has decided to make greater use of its section 9 referral 
authority, rather than to develop a worker protection program 
of its own.^-^-^^ As a consequence, OSHA has received during 
the last year-and-a-half more of these "TSCA referrals" than in 
the past .-^-^-^'' Indeed, some officials in OSHA and EPA have 
suggested that a TSCA referral is a convenient way for EPA, 



-*-^^ 15 U.S.C. § 2608. 

-^-^^'^ For example, EPA can ban a chemical from a workplace. 15 
U.S.C. § 2605(a)(2)(A). OSHA could ban a chemical only 
if that would be "feasible." 

-*-^^-^^ Seminario Interview, supra note 131. 



14 7/ 



During the last year-and-a-half, OSHA has received three 
TSCA referrals from EPA. Telephone Interview with John 
Martonik, Deputy Director, Health Standards Directorate, 
OSHA, February 5, 1987. OSHA could no doubt absorb this 
small number of referrals into its informal 
priority-setting system. However, EPA has only recently 
begun referring matters to OSHA, rather than dealing with 
them under its TSCA authority, and there is a great 
potential for many more referrals in the near future. 
Id. 



OSHA RULEMAKING 135 



which has only promulgated two substantive regulations in the 
ten year lifetime of TSCA, to "punt" difficult regulatory 
issues to OSHA. 

OHSA and EPA have recently entered into a formal 
Memorandum of Understanding (MOU) that addresses the 
interaction between EPA and OSHA during TSCA referrals. The 
MOU requires EPA to send OSHA a list of substances being 
considered for TSCA referral twice per year. Within a month 
after OSHA ' s acknowledgment of receipt of the notice, EPA and 
OSHA employees must meet to coordinate information on the 
listed substances. EPA must inform OSHA within 48 hours after 
sending a report to the Federal Register. After the Report is 
published, personnel from both agencies must meet again to 
coordinate information on the chemical that is the subject of 
the report, and OSHA must give EPA 48 hours notice prior to 
publishing its response in the Federal Register .^-^-^^ 
Although the MOU provides for extensive coordination between 
the two agencies, OSHA has no power to veto a TSCA referral if 
the Administrator of EPA exercises, his discretion to publish a 
report in the Federal Register. At best, OSHA is given an 
opportunity to persuade EPA not to send the referral. Nowhere 
in the agreement is there an indication that OSHA's current 
workload is an appropriate factor to be considered in deciding 
whether or not a report should be published. While the MOU 
represents a commendable attempt to ensure the coordination of 
information relevant to the decisions of both agencies, it will 
stem the flow of TSCA referrals only to the extent that OSHA 
staff can persuade EPA staff that workplace risks are better 
addressed by EPA's TSCA authorities. 

Despite the formal interagency arrangement with EPA, OSHA 
does not currently have a formal internal mechanism for 
responding to TSCA referrals. In practice, a project officer 
in the Health Standards Directorate is assigned the task of 
preparing a draft response, which may range from doing nothing 
to preparing a Notice of Proposed Rulemaking .-*-^-^^ As a 
practical matter, this job can pull the project officer away 
from other rulemaking responsibi lities .^-^-^^ Many OHSA 
officials are concerned that if a large number of referrals 
continue to flow from EPA to OSHA, EPA will soon be setting 
OSHA's rulemaking agenda .-*-^-^^ 



^-^-^^ Memorandum of Understanding Between the Environmental 
Protection Agency and the Department of Labor, EPA 
Agreement No. PW 16931704-01-0 (Feb. 6, 1986). 

^-^-^'^ Martonik Interview, supra note 59; Stein interview, supra 
note 123. 

^-^-^^ Stein interview, supra note 123. 

-^-^-^^ Martonik interview, supra note 59. 



136 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



TSCA referral has at least two distinct advantages. 
First, EPA is in a far better position to acquire some kinds of 
information on chemicals that might pose risks to workers. 
While both EPA and OSHA look to NIOSH for compilations of 
existing health effects studies on chemicals, EPA has the 
additional power to require manufacturers to conduct additional 
studies .^-^-^^ Second, EPA has a much larger staff of 
toxicologists to evaluate epidemiological and animal studies 
and perform risk assessments .-*-^-^^ 

There are, however, several disadvantages to TSCA 
referral. EPA is in no better position than OSHA to determine 
workplace exposures, and EPA can be of no help at all on the 
questions of the existence and feasibility of control 
technologies .^-^-^^ Since EPA does not have special expertise 
in workplace exposure and in control technologies, EPA can 
refer to OSHA chemicals that may pose relatively trivial 
workplace risks .-^-^-^^ Even when OSHA personnel know that 
there is very little worker exposure to a referred chemical, 
the agency may still be required to prepare a formal response 
to EPA. This implicitly gives the referred chemical a high 
priority, at least for a brief time while OSHA prepares its 
response . 

A second disadvantage is that EPA may use TSCA referral as 
a convenient device for avoiding hard questions. If so, then 
the TSCA referrals that OSHA receives are likely to be 
controversial and resource-intensive. Unlike rulemaking 
petitions, where every petition is supported by some interest 
group that is usually willing to gather information and provide 
pressure to proceed, there may be no organized constituency 
behind TSCA referrals. EPA can simply dump the matter in 
OSHA's lap and walk away. There is, in addition, some evidence 
to suggest that the Office of Management and Budget has sought 
referrals to OSHA as a vehicle for avoiding some of the more 
stringent regulatory tools available to EPA that are 
unavailable to OSHA, thus making OSHA's job all the more 
difficult. ^^^ 



-^^ 15 U.S.C. §2603 . 

-^-^'^ Seminario interview, supra note 131. 



S 4 



S 6 



Seminario interview, supra note 131 



supra note 59. The February, 1986 Memorandum of 
Understanding between EPA and OSHA, supra note 148, may 
reduce this threat to some extent. 

EPA's Asbestos Regulations, Report on a Case Study on 0MB 
Interference in Agency Rulemaking by the Subcommittee on 

(Continued on next page) 



OSHA RULEMAKING 137 



Third, TSCA referral can duplicate OSHA's own efforts and 
those of NIOSH. For example, OSHA has long been examining the 
health effects of asbestos. EPA's activities were largely 
duplicative of OSHA's efforts, insofar as they related to 
workers, and the referral of asbestos (a referral that was 
later withdrawn) was not especially useful to either 
agency. ^-^-^^ Although it is too soon to tell whether the 
formal Memorandum of Understanding between EPA and OSHA for 
TSCA referrals has eliminated this potential for duplication, 
-^-^-^^ it should go a long way toward conserving the 
informational resources of both agencies. 

While TSCA referral can be beneficial to OSHA, and 
ultimately to workers, the agency should not allow it to drive 
its own agenda. With sufficient coordination and cooperation, 
TSCA referral can solve problems for OSHA, rather than create 
them. When EPA's initial exposure analyses indicate that the 
workplace is a primary source of exposure to a potentially 
hazardous chemical, the recent Memorandum of Understanding will 
require it to make OSHA aware of that fact at a very early 
stage to allow OSHA to begin assigning a priority to the topic. 
And when OSHA finds that it needs more information on a 
chemical hazard that EPA has the authority to require, the 
agencies should be able to work out a procedural vehicle for 
putting the substance on EPA's agenda .^-^-^^ Finally, EPA and 
OSHA should be able to coordinate regulatory activities to 
allow EPA to use its authority to take more protective actions 
when OSHA's authority is insufficient. EPA and OSHA have 
attempted to resolve the information duplication problem with a 
Memorandum of Understanding. Further interagency coordination 
could go a long way toward facilitating the use of TSCA in 



1 5 9 



(Continued from previous page) 

Oversight and Investigation of the House Committee on 
Energy and Commerce, 99th Cong., 1st Sess. (1985); 
Jacobson Interview, supra note 19. 

Id. 

See note 148, supra. 

Congress clearly intended for the Interagency Testing 
Committee to play this role to some extent, but the 
Committee's testing recommendations have tended to stack 
up at EPA's front door, much as TSCA referrals are 
beginning to stack up at OSHA's front door. See Delays 
in Setting Standards, supra note 49. In any event, there 
is no apparent reason why the two agencies could not work 
out a bilateral arrangement to facilitate EPA's 
consideration of OSHA's requests for information, either 
from EPA's existing files or through the exercise of its 
authority to require testing. 



138 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



requiring testing that would be useful to OSHA and in using 
EPA's TSCA authorities to address risks that OSHA cannot 
adequately address. 

6. Updated Private Standards. 

Pursuant to statutory command, OSHA in 1971 promulgated 
"national concensus standards," incorporating generally 
accepted health and safety practices as recommended by private 
and governmental standard-setting organizations .^-^-^'^ 
Congress empowered OSHA to promulgate the concensus standards 
on a one-time basis without notice-and-comment procedures. 
Unfortunately, in the intervening years the concensus standards 
have become dated as standard-setting organizations have 
revised their guidelines and standards .-^-^-^^ As private 
standard-setting organizations amend their consensus standards, 
OSHA could conceivably work the amended private standards into 
its prioritization process on a case-by-case basis. The 
primary advantage of a systematic device for updating OSHA 
standards to reflect changing national consensus standards is 
the additional protection that it would provide to workers. 
Since the recommended levels would represent a consensus or 
near-consensus within the industry, OSHA ' s efforts should not 
be as controversial as is typically the case, and the agency 
might thereby conserve scarce technical and litigation 
resources . 

Adjusting agency priorities to reflect consensus standards 
does, however, have some significant disadvantages. Some 
companies would be opposed to the government's singling out a 
chemical for regulation, even if that regulation was not 
terribly burdensome, out of concern for the public attention 
that an OSHA standard-setting action invariably draws .-'-^-^^ 
Once it became widely known that OSHA was relying upon the 
private standard setting agencies in setting OSHA priorities, 
companies would no doubt focus greater attention on the 
activities of those entities, a process that might ultimately 
change the entire nature of the private standard setting 
process into a less desirable adversarial process. Finally, it 
is not clear that the order in which private standard setting 
agencies take up particular workplace risks is necessarily the 
most appropriate prioritization scheme for the federal 
government . 



16 2/ 



Hygienist, Directorate of Health Standards Programs, OSHA 
(October 30, 1986) . 

Telephone interview with Neil King, Wilmer, Cutler & 
Pickering (October 28, 1986). 



OSHA RULEMAKING 139 



In sum, while OSHA might appropriately look to the 
activities of private standard setting agencies in setting OSHA 
priorities, it cannot allow those activities to dominate its 
agenda. Ultimately, OSHA must establish its own priorities and 
allow the private organizations to set theirs. 

7. NIOSH Criteria Documents. 

A plausible argument could be made for the proposition 
that Congress intended for NIOSH to drive OSHA rulemaking 
priorities indirectly as it submits criteria documents and 
recommendations. In theory, NIOSH could have developed a 
prioritization scheme (presumably in close conjunction with 
OSHA) and submitted criteria documents in accordance with that 
scheme. OSHA could have simply taken up the criteria documents 
seriatim and determined whether or not to initiate rulemaking 
efforts. ^-^^ 

In practice, NIOSH has not been very influential in 
setting OSHA priorities. Responding to early criticism that it 
was not submitting enough documents to keep OSHA busy, NIOSH 
promulgated dozens of criteria documents within the space of a 
few years, and OSHA now faces a lengthy backlog of aging 
criteria documents .^-^-^^ NIOSH in the early 1970s did study 
how it should set priorities for preparing criteria documents, 
but the scheme that it finally hit upon was based heavily upon 
the quantity of the material produced and did not reflect other 
judgmental factors very well .-^"-^-^^ Production quantities, in 
OSHA's opinion, proved to be a poor surrogate for human 
exposure and toxicity. Hence OSHA was disappointed to receive 
early criteria documents on such unimportant substances as 
sulfuric acid, ammonia, sulfur dioxide and sodium 
hydroxide.^-^-^^ In addition, OSHA officials were unimpressed 



6 4/ 



Holtzman Interview, supra 
note 114 . 

Telephone interview with Larry Mazzuzkelli , Associate 
Director for Policy Development, Division of Standards 
Development and Technology Transfer, National Institute 
for Occupational Safety and Health (November 5, 1986); 
Gas Interview, supra note 159; Stein interview, supra 
note 123. The General Accounting Office reported in 1977 
that as of September 30, 1976, NIOSH had submitted 53 
criteria documents to OSHA. Delays in Setting Standards, 
supra note 49. GAO Carcinogen Report, supra note 317, at 
11. A decade later, OSHA had promulgated final standards 

(Continued on next page) 

Wrenn Interview, supra note 49. 
Wrenn interview, supra note 49. 



140 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



with the quality of the criteria documents. It was clearly not 
the case, as Congress had apparently envisioned, that OSHA had 
only to tear the covers off the criteria documents and place 
them in the rulemaking docket to support stringent 
standards .-^-^-^^ 

In later years, NIOSH has attempted to work more closely 
with OSHA to set a combined agenda, but these efforts have been 
largely unsuccessful. NIOSH officials complain that OSHA 
officials met with them five years ago and demanded fast-track 
criteria documents for certain substances and then apparently 
forgot that they had asked NIOSH to do this.^-^^ When 
presented with a document that was a high priority for OSHA 
officials five years ago, current OSHA officials expressed 
little interest .^-^-^^ This experience, not surprisingly, has 
generated some skepticism in NIOSH about suggestions that the 
two agencies coordinate their priorities. 

In late 1983, OSHA launched a standards completion project 
under which NIOSH was given a list of 113 chemicals for which 
OSHA had begun, but not finished, some form of rulemaking 
activity. By the fall of 1984, NIOSH had updated the existing 
criteria documents on these substances and recommended that 
OSHA should: (l)proceed with rulemaking efforts with respect to 
49 of the 113; (2) remove temporarily 18 substances from the 
list pending the completion of ongoing studies; and (3) remove 
permanently 46 substances from the list because there was not 
sufficient data upon which to base a regulatory decision. OSHA 
agreed to "limit its consideration of further regulatory 
activity to the list," but it did not attempt to prioritize 
substances on the list.-^-^-^^ 

The strongest argument for giving NIOSH a role in OSHA 
priority setting is that agency's considerable expertise in 
evaluating workplace risks. NIOSH has the broad mandate 
necessary for devoting attention to the somewhat abstract 
question of priority-setting criteria. On the other hand, OSHA 
cannot cede its priority-setting power to an agency in an 
entirely separate Department of the government. Clearly, 
governmental resources would be best utilized if OSHA and NIOSH 



(Continued from previous page) 

for less than ten of those 53 topics. During that 
decade, NIOSH has continued to write criteria documents 
and in many cases to update old criteria documents. 

Wrenn interview, supra note 49. 

Mazzuzkelli interview, supra note 164; Stein interview, 
supra note 123. 

Stein Interview, supra note 123. 

1986 Regulatory Agenda 253-54. 



OSHA RULEMAKING 141 



combined their resources to address the prioritization problem 
and adjusted their schedules accordingly. 

One problem with this solution, however, is that NIOSH may 
not be able to maintain the flexibility necessary to deal with 
the rapid changes in priorities that might legitimately result 
from outside petitions, congressional and administration 
pressure, EPA referrals, and ACGIH and ANSI updates. Once 
NIOSH has initiated the process of preparing a criteria 
document and recommendations, it cannot easily switch gears 
and strike off in new directions. Therefore, there will 
probably always be some mismatch between OSHA and NIOSH 
priorities. Nevertheless, NIOSH could be very helpful to OSHA 
in suggesting objective criteria for listing hazardous 
substances and in assembling the information necessary to 
compile such a list. 

8. Information from the Field. 

OSHA has a large cadre of inspectors who are continually 
observing and monitoring workplaces on a daily basis .^-^-^'^ 
Their efforts produce large amounts of information about the 
levels of some hazardous substances in the workplace .^-^^^ 
This information can be used to determine how well existing 
standards are being met and what aspects of the standards are 
not working or are unrealistic. Field reports of violations of 
the general duty clause and of deaths and injuries in the 
workplace can also be examined to ferret out especially 
hazardous workplaces or work practices .-^-^^^ Although other 
health and safety agencies use reports from the field 
systemically in setting their priori ties ,-^-^-^^ OSHA has only 
recently begun to develop a system to tap this valuable 
information for standard-setting purposes .^-^-^^ 



1 7 1 



17 2/ 



1 7 3 



7 5/ 



By one account, OSHA has 400 industrial hygienists in the 
field, who have inspected more than 100,000 workplaces. 
Frodyma Interview, supra note 66. 

Field inspections reveal even more information about the 
validity of existing safety standards and the need for 
new ones. B. White Interview, supra note 59. 

Henshel Interview, supra note 127. 



of Program Development and Evaluation, Office of Drinking 
Water, EPA (November 18, 1986); Telephone interview with 
Judy Segal, Director, Policy and Program Planning Staff, 

(Continued on next page) 

Frodyma Interview, supra note 66; Gas Interview, supra 
note 159. 



142 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Field information has not been useful in setting agency- 
priorities in the past.^-^-^^ The past information system had 
several flaws, not the least of which is that it was limited 
largely to chemicals for which OSHA already had standards. 
While this information can be useful in evaluating existing 
standards ,-^-^-^'' it may not be very helpful in setting new 
standards .-^-^-^^ In addition, the agency did not pay a great 
deal of attention to validating the analytical chemistry upon 
which the measurements for enforcing health standards were 
based. -^-^-^^ While inspectors in the field could be expected 
to identify new safety hazards from observations of hundreds of 
workplaces and investigations of deaths and serious injuries in 
the workplace,-^-^-^"^ they not likely to detect many new health 
hazards . 

Reports from the field may be a valuable source of 
information for priority-setting in the future. At the very- 
least, the agency should have in place a capacity to mine field 
reports for indications of serious workplace hazards. As the 
agency's field reporting system achieves greater 
sophistication, it should prove of increasing value to the 
priority-setting process. 

9. Developments in States and Other Countries. 

OSHA has relied very little upon developments in the 
states and other countries in setting priorities for 
occupational health standards .-^-^^^ However, OSHA does at 
times face indirect pressure to regulate based upon what the 
states or other countries have done. For example, automobile 
workers who live in Detroit and work in Canada are better 
protected from some risks than workers in U.S. plants .-^-^-^^ 



(Continued from previous page) 

-^-^-^^ Food Safety and Inspection Service, USDA (November 25, 

1986); Telephone interview with Barrv Felrice, Associate 

(Continued on next page) 

-^-^^^ Frodyma interview, supra note 66; Sevin interview, supra 
note 133. 

^-^-^^ Henshel Interview, supra note 127. 

^-^-^^ Sevin Interview, supra" note 133. 

-^-J-^"" Sevin Interview, supra note 133. 

-^-^-^^ Henshel Interview, supra note 127. 

-^-^-*-^ Gas Interview, supra note 159. 

-*-^^'' Gas Interview, supra note 159. 



OSHA RULEMAKING 143 



OSHA standards often guide other countries in setting their own 
standards. An examination of standards in place in the states 
and other developed countries may reveal cases in which 
existing OSHA standards are seriously out of step and may 
identify risks that are not addressed by OSHA standards at all. 
While comparative analysis cannot be the engine that drives 
OSHA's priority-setting process, it may have some role to play. 

10. Summary. 

An appropriate metaphor for the current OSHA standard 
setting process is that of a business establishment with a 
front door, a side window, and a back door .■^-^-^'' The owner 
expects most business to come through the front door, but it 
reserves the back door for dealing with complaints about 
previous transactions. Especially demanding and impatient 
customers come in through the side window and thereby avoid the 
crowd that is pressing at the front door. In the OSHA context, 
criteria documents, recent petitions, information from the 
field, and recently amended ACGIH and ANSI recommendations are 
all pressing at the front door. 0MB and the White House are 
pushing some previously promulgated rules in through the back 
door, and Congress and the courts are pushing some rulemaking 
petitions and other "hot" topics through the side window. At 
present, the press of business for OSHA's reduced staff from 
the back door and side window is so great that it cannot accept 
any business through the front door. Instead of an orderly 
queue at the front door, there is a great crowd of potential 
topics, each of which is probably deserving of OSHA's 
attention. At frequent intervals an interest group becomes 
impatient with waiting in line and moves over to the side 
window. The time is near at hand when there will also be a 
disorderly crowd at the side window. OSHA long ago lost 
control over its front-door agenda; it now risks total 
paralysis as its limited capacity to produce rules becomes 
overwhelmed by the press at the side window. 

Although some participants and observers of the OSHA 
rulemaking process maintain that the petition process is alone 
sufficient drive OSHA toward regulating the most hazardous 
workplaces,-*-^^^ most agree that OSHA should set its own 



(Continued from previous page) 

^-^-^'' Administrator for Rulemaking, National Highway Traffic 
Safety Administration (November 25, 1986). 

^-^-^^ Numerous interviewees inside and outside of OSHA 
confirmed the validity of this metaphor. 

-^-^-^'^ E.g., Frodyma interview, supra note 66; Martonik 

interview, supra note 59; King interview, supra note 162. 



144 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

priorities .^-^^'' And, despite several failed internal 
attempts to establish an explicit prioritization scheme,-^-^-^^ 
virtually all observers of the process agree that OSHA 
currently lacks even a rudimentary prioritization 
process .^-^-^^ During the last few years, OSHA's agenda has 
been set entirely by outsiders .^-^-^^ There is no way of 
knowing whether this externally driven process results in 
OSHA's addressing the most important rulemaking topics. No one 
of the outside parties driving the process is concerned with 
the broad question whether the agency is addressing those 
topics for which it can be most effective in reducing the most 
serious workplace risks. While few would argue that past 
rulemaking petitions have addressed trivial risks, only OSHA is 
in a position to determine whether a particular rulemaking 
initiative represents the best use of the agency's severely 
limited resources .^-^-^^ OSHA's inability to set its own 
priorities also affects the regulated industry's ability to 
make future investment decisions. Industry representatives 
complain of the "halting process of regulation" that results 
from OSHA's failure to establish definite priorities .^-^-^^ An 
explicit and open prioritization procedure would allow OSHA to 
regain to some extent control over its own agenda, and it would 
make regulatees and beneficiary groups aware of OSHA's plans 
for the future. 



6 / 



Interviews with academics, labor union officials, 
business officials and OSHA employees revealed virtual 
unanimity on the proposition that OSHA should have some 
process for establishing its own priorities. 

Harwood interview, supra note 138; Stein interview, supra 
note 123; telephone interview with Robert Beliles, Senior 
Scientist, Carcinogen Assessment Group, EPA (October 21, 
1986) . 

-^-^^ Sevin interview, supra note 133; Wrenn interview, supra 
note 49; Seminario interview, supra note 131; Braslow 
interview, supra note 123; Sampson interview, supra note 
134. 

-^-^'^ See National Academy of Sciences, National Resource 
Council, Risk Assessment in the Federal Government: 
Managing the Process 94 (1983); Interview with Scott 
Railton, Reed, Smith, Shaw & McCleary, October 30, 1986. 



1 8 9 



Seminario interview, supra note 131; Sevin interview, 
supra note 133. 



supra note 188. 



OSHA RULEMAKING 145 



An explicit prioritization mechanism would also be useful 
to OSHA in its internal management. Without a list of 
priorities, members of the agency staff can never be certain 
that they will not be called away in the midst of a project to 
begin a new project with a higher priority .-^-^-*-^ Likewise, 
OSHA coordination with contractors and other agencies can be 
arranged so that up-to-date information is available to agency 
decisionmakers at the time that it will be most usef ul .-^-^^'^ 

There are, however, significant practical disadvantages to 
adopting a formal prioritization scheme. First, the agency 
must come up with a rational scheme for ranking priorities. 
Fortunately, there is near unanimity that the ideal 
prioritization scheme would stress risks to workers (including 
considerations of toxicity and extent of exposure), with 
perhaps some attention being paid to the practicality of 
controls. Unfortunately, there is rarely enough high quality 
information available to make quantitative comparisons. Still, 
as the next section of this Report reveals, there are 
alternatives to the "chemical of the week syndrome," and OSHA 
should be able to create a procedure for prioritizing 
chemicals, even if it is not perfect. 

Another disadvantage of a prioritization scheme is that it 
necessarily forces upper level decisionmakers in the agency to 
make hard decisions about which subjects warrant attention. In 
addition to making difficult substantive rankings, such as the 
relative weight to be given to substances that pose small risks 
to a large number of workers versus substances that pose a very 
high risk to only a very few workers, the agency must make 
difficult political choices about which employees should be 
protected and which industries should be subject to new agency 
standards. There is an understandable desire on the part of 
OSHA to pressure the "mystique" that everything that comes 
before it has a high priority .-^-^-^^ Any attempt to state 
explicit priorities will destroy this mystique. 

Similarly, explicit prioritization can make it difficult 
for the agency to explain why it is not proceeding ahead 
rapidly with a politically controversial project. For example, 
under the current OSHA regime, which lacks a prioritization 
scheme, the agency can put its efforts to promulgate a safety 
standard for the oil and gas industry on the "back burner" 
while that industry suffers through an economic 



-*-^-^^ Sevin interview, supra note 133; Stein interview, supra 
note 123; Braslow interview, supra note 123. 

^-^-^^ Stein interview, supra note 123. 

^-^-^^ F. White interview, supra note 59; Frodyma and Flowers 
Interview, supra note 66. 



146 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



and it can elevate to a high priority 
uncontroversial projects that will not necessarily produce 
large health or safety benefits but which will yield attractive 
statistics .-^-^-^^ With an explicit prioritization scheme in 
place, OSHA would at least have to explain why one standard has 
slipped in priority, and why another project has moved ahead, a 
task that might prove unpalatable to agency leaders. 

Finally, to the extent that the prioritization scheme 
results in a public list or agenda, the agency can expect 
resistance from those with an economic interest in the hazards 
that wind up on the list. The agency will never be able to 
justify rationally why it placed one topic above the next lower 
one, because large uncertainties surround priority setting in 
the context of OSHA rulemaking. If interested parties may 
force the agency to justify any particular ranking to a 
reviewing court, it will probably fail. The agency will only 
be able to adopt an explicit prioritization scheme if the 
reviewing courts are educated about the difficulties of setting 
priorities and if they understand that priority-setting is a 
tentative threshold exercise that does not necessarily imply 
that any regulatory action will be taken in the long run. As 
will be discussed later in this section, the appropriate place 
for judicial review is after the agency takes action with 
respect to a workplace hazard, not after it has decided which 
hazards to examine. 

Despite these disadvantages, there is at this point in 
OSHA's evolution a broad consensus around the view that OSHA 
must assume control over its own rulemaking agenda. The 
Adm.inistrative Conference has already recommended in the 
context of regulating carcinogens that agencies set priorities 
for selecting chemicals for further testing, for intensive 
scientific and regulatory evaluation, and for administrative 
action to limit or eliminate exposure.-^-^-^^ The advantages of 
preparing an explicit list for this purpose substantially 
outweigh the disadvantages. 

RECOMMENDATION: OSHA should immediately establish a 
process for determining an explicit list of agency 
priorities to which OSHA will presumptively adhere in 
undertaking future rulemaking intiatives. 

B. Alternative Prioritization Schemes. 



^-^-^^ Frodyma Interview, supra note 66. 

^-^-^'' Interview with Daniel Jacoby, Department of Labor, Office 
of the Solicitor, in Washington, D.C. (September 26, 
1986) . 

-^^-^^ ACUS Recommendation No. 82-5, 1 C.F.R. §305.82-5 (1986). 



OSHA RULEMAKING 147 



Although the question of prioritization is never an easy- 
one for an agency charged with writing high-stakes regulations 
in an area dominated by poor information and huge 
uncertainties, other agencies appear to have achieved a much 
greater degree of success than OSHA. The Environmental 
Protection Agency, for example, administers several programs 
that require the agency to set priorities for health and 
environmental regulations, and that agency still maintains a 
fair degree of control over its own destiny, insofar as its 
highly detailed statutes give it control to begin with. There 
are several broad models from which OSHA may choose in 
selecting an approach to prioritization, including ad hoc 
management choices, systematic selection by committee, 
numerical scoring systems, and quantitative risk 
assessment .^-^-^^ This section of the report will examine the 
advantages and disadvantages of each of the available models 
and suggest a process that will allow OSHA to integrate one or 
more models into its own agenda-setting efforts. 

1. Ad Hoc Management Choices. 

The current prioritization scheme at OSHA, to the extent 
that one can be identified at all, falls into the first 
category of "ad hoc management choices." Under this regime, 
management reacts to all potential sources of agency priorities 
in an unbounded fashion. Each person requesting agency action 
is told that the agency will get to his topic as soon as 
possible. Management then assigns the topic to a staff member 
who is already busy with many other items. The staff member 
receives subtle signals through his superiors from upper level 
management about the amount of attention that he should devote 
to the assigned topic, and these signals may change 
periodically as the topic heats up and cools off in the highly 
political atmosphere in which upper level management operates. 
Upper level management may gather with staffers and mid-level 
management periodically to "brainstorm" about agency 
priorities, especially at the time of the year when the agency 
must prepare its submission for the President's Regulatory 
Agenda .-*-^-^'' But these meetings do not result in firm 
institutional commitments. The agency "intuitively" knows that 



The following analysis derives much from the observations 
of Dr. Imogene Sevin, an OSHA health scientist, who has 
devoted a great deal of attention to the question of 
priorities as an employee of both NIOSH and OSHA, 

The first prioritization process in NIOSH relied heavily 
upon brainstorming by agency staff. Sevin Interview, 
supra note 133. 



148 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



some topics are more important than others, but it never makes 
the criteria by which it knows this explicit .-^-^-^'' 

The ad hoc management approach has at least four 
advantages that render it especially attractive to upper level 
managers. First, it is fast and inexpensive. It does not 
require much informational input, because it relies very 
heavily on the informal judgment of agency management and 
staf f .-^-^-^^ Since it is very hard, for example, to compare a 
large risk of contracting hepatitis with a small risk of 
contracting cancer except on an "intuitive" basis ,-^-^-*-'' an 
agency using the ad hoc approach can avoid expensive data 
gathering and analysis that would probably not make the 
decision any easier. 

Second, its flexibility enhances the discretion of upper 
level management. Management is not bound by ironclad agendas 
that reflect technical input but do not consider political 
realities. Management decisions are not implicitly driven by 
the hidden agendas of lower level staff. Management may put 
items on the "back burner" when there is no apparent pressure 
to force them through the process and, by contrast, management 
can accelerate "side-window" items rather rapidly through the 
process when outside pressures grow. 

Third, the ad hoc management approach allows politically 
accountable upper level management to avoid making definitive 
decisions that are certain to annoy one or more constituencies. 
It reinforces the natural desire of politically accountable 
decisionmakers to have good news for everyone. The agency is 
never in the position of telling a constituency group that its 
vital topic is not very important to the agency. 

Finally, the ad hoc approach minimizes the amount of 
explaining that the agency has to do. It does not have to come 
up with seemingly rational arguments for the essentially 
arational task of placing one topic higher on its agenda than 
another. Only when a petitioner is sufficiently put off by the 
agency's lack of resolve that it is willing to file a 
bureaucracy-forcing action in court is the agency called upon 
to explain itself, and even then it can often satisfy the 
reviewing court by producing an optimistic schedule and 
assuring the court that the agency has adjusted its priorities 
so as to make a good faith effort to meet the now-explicit 
deadlines . 

The primary advantages of the ad hoc management approach 
are also its chief disadvantages. Because it requires less 



Frodyma interview, supra note 66. See also Delays in 
Setting Standards, supra note 49, at 19-21 (relating ad 
hoc prioritization in NIOSH and OSHA in the mid-1970s). 



2 



Sevin interview, supra note 133. 
^-^-^^ Frodyma interview, supra note 66. 



OSHA RULEMAKING 149 



information and relies so heavily upon political judgment, it 
is likely to do a poor job of ranking hazards according to true 
relative risks. ^-^-^^ Because of its extreme sensitivity to 
political pressures, the ad hoc approach will not necessarily 
address the worst occupational hazards first. For example, 
there is fairly broad agreement within the agency that an oil 
and gas industry safety standard would provide very large 
safety benefits, but political considerations have essentially 
eliminated that topic from the agency's agenda. Conversely, 
the political furor that erupted over the discovery of ethylene 
dibromide in citrus and food grains sent OSHA scurrying to 
promulgate an EDB standard that will protect only a relatively 
few workers from a substance that is almost certainly doomed to 
extinction in the near f uture .^-^-^^ 

There is still some vitality left to the theory that 
Congress created regulatory agencies to bring expertise to bear 
on social problems. When technical considerations are capable 
of identifying topics that should be high on OSHA's agenda, it 
should use its expertise to find them, rather than blowing with 
the political winds. Although technical considerations could 
be more relevant to ad hoc management decisions than political 
considerations, OSHA's technical staff is in practice seldom 
consulted when management makes the inexplicit decisions that 
subtly drive agency priorities. 

A second disadvantage of the ad hoc management approach is 
that outsiders generally do not know the real status of topics 
of interest to them. They are simply told that the agency is 
working on it, without any indication of how high the matter is 
on the agency's agenda. Indeed, even agency staff are often at 
a loss as to the status of the topics assigned to them when 
they receive only inexplicit signals from upper level 
management filtered through mid-level management. Low level 
staffers sometimes express a sense of frustration at working 
very hard on a topic only to discover that it is a low priority 
item when it languishes on the desk of an upper level 
decisionmaker . 

Third, when combined with a high turnover rate at upper 
management levels, the ad hoc management approach can breed 



2 3 



This was, for example, one of the real failures of the 
original NIOSH hazard ranking approach, which relied 
heavily upon staff brainstorming sessions. Sevin 
interview, supra note 133; Wrenn interview, supra note 
49. 

Vladeck Interview, supra note 17. Another frequently 
cited example of a politically inspired rulemaking 
initiative that had the potential to achieve relatively 
few health and safety benefits is the never-completed 
"walkaround pay" initiative. See B. Mintz, supra note 
69, at 546-56; Bokat Interview, supra note 60. 



150 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



inconsistency. Under the current ad hoc prioritization 
approach, priorities changes as one leader replaces 
another .^-^-^^ Even if one Assistant Secretary is succeeded by 
a like-minded person, he or she must still be educated about 
why certain items had low priority and others high 
priority. ^^^^ 

Fourth, the vacillation that typifies the ad hoc 
management approach can also be wasteful of agency resources. 
A lot of the work that goes into a project is wasted when that 
project is mothballed until the next time that it becomes 
controversial. When it finds its way back onto the agency's 
agenda, much of the previous work must be repeated. For 
example, much of the work that the agency had done on cadmium 
in the late 1970s, before it was implicitly shelved in the 
early 1980s must be repeated now that a petition has once again 
forced it to near the top of the agency's agenda. In short, 
the ad hoc management approach lacks a vehicle for making final 
decisions to drop topics from the agency's agenda. Issues tend 
to wallow around the agency for years without any direction. 
The ad hoc management approach lacks a mechanism for putting 
old semi-abandoned projects out of their misery. 

2. Quantitative listing. 

At the opposite extreme from ad hoc management choices is 
the quantitative listing approach to setting agency priorities. 
Under this approach quantitative analysis of technical 
considerations determines a ranked list of agency priorities. 
All of the existing quantitative approaches are founded on the 
rather uncontroversial assumption that the agency should give 
its highest priority to those workplace conditions that pose 
the greatest risks to employees. The prioritization process is 
then determined by a technical evaluation of the relative risks 
of the relevant universe of rulemaking subjects, with some 
allowance made for administrative and (perhaps) technological 
and economic feasibility. 

a. Risk Assessment. 

The most technically precise quantitative listing approach 
relies on strict quantitative risk assessment. Based upon 
information on the toxicity of various compounds and the extent 
of worker exposure, the agency technical staff undertakes 
quantitative risk assessments and ranks substances according to 



Sevin interview, supra note 133 



OSHA RULEMAKING 151 



their relative risk to workers .-^-^-^^ For example, EPA has 
developed some fairly sophisticated risk assessment tools that 
rely upon a combination of data bases on health effects and 
exposure routes .^-^-^^ By focusing on actual exposure, rather 
than allowable exposure, the risk assessment approach keeps the 
agency from initiating rulemaking efforts on substances for 
which actual exposures are far lower than current public or 
private standards .-^-^-^^ If the risk assessments could be 
performed accurately, the agency could rest assured that it was 
addressing the worst risks f irst .-^-^-^^ 

Risk assessments are available for many chemicals. NIOSH 
criteria documents often contain risk assessments or contain 
sufficient information on toxicity and exposure to allow OSHA 
to produce a rudimentary risk assessment with minimal resource 
expenditure. EPA has also performed risk assessments on a 
large number of chemicals in connection with its many 
regulatory programs. After modifying such risk assessments to 
reflect workplace exposure, OSHA could use them to establish 
agency priorities. In addition, EPA's Office of Toxic 
Substances has written numerous chemical hazard identification 
profiles (CHIPs) summarizing available information on chemicals 
that could be helpful in drafting rudimentary risk assessments. 
Finally, the published literature contains an increasing amount 
of risk assessment work, although this is generally limited to 
well-known hazards for which other risk assessments are often 
available. 

One disadvantage of risk assessment-based listing is the 
unsettled state of the risk assessment art. Risk assessment 
tools are only available for a very few health effects, such as 



2 7. 



2 8/ 



2 9 



2 10/ 



See Peat, Marwick, Mitchell & Co., The Role of Risk 
Assessment in Setting Federal Regulatory Priorities, 
Report Prepared for the Chemical Manufacturers' Ass'n. 
I.V.C. (1984) [hereinafter cited as Peat, Marwick 
Report] . 

Environmental Protection Agency, TSCA Priorities and 
Progress (1983). 

Harwood interview, supra note 138. 

See generally, D. Pedersen, R. Young, D. Sundin, A Model 
for the Identification of High Risk Occupational Groups 
Using RTECS and NOHS Data (NIOSH Technical Report 1983) 
(Describing computer program for combining risk data from 

(Continued on next page) 

Sevin Interview, supra note 133; Mazzuzkelli interview, 
supra note 164; Stein interview, supra note 123; Beliles 
interview, supra note 186. 



152 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



health effects, such as neurological effects and reproductive 
effects, do not exist exist. Even those quantitative tools 
that are available are always controversial .^-^-^'' For 
example, the outputs of quantitative risk assessment models for 
carcinogenesis can vary over ten orders of magnitude. ^-^-^^ 
With this degree of sophistication, such models cannot be 
expected to yield accurate predictions of real-world risks. On 
the other hand, precise predictions are not necessary for the 
prioritization function. The list need only reflect the risks 
that various chemicals pose relative to one another. The 
predictions need not be accurate in absolute terms. As long as 
the same model is used to evaluate all of the chemicals, the 
ranking should be appropriate, absent some fundamental flaw in 
the model. 

Another severe drawback to risk assessment-based listing 
is the poor state of the information that is typically 
available to the agency at the prioritization stage. Unless 
the agency is prepared to do a substantial part of the standard 
setting job while it is setting priorities, it cannot produce 
an accurate risk assessment-based prioritization list. Since 
OSHA lacks authority to force manufacturers to test chemicals, 
it may not even have rudimentary toxicological data on 
chemicals for which there are high workplace exposures. 
Conversely, the agency at this early stage often lacks accurate 
information on worker exposure to highly toxic chemicals. The 
agency must take advantage of whatever information it can 
conveniently locate. Unfortunately, this information is often 
of disturbingly low quality .^-^-^^ The agency then faces the 
dilemma of comparing risks assessed on the basis of high 
quality studies with risks assessed on the basis of poor or 
invalid studies. The risk assessment-based listing approach 
does not provide a convenient way to adjust priorities based on 
the quality of the available data. Since the assessments that 



(Continued from previous page) 

the Registry of Toxic Effects of Chemical Substances with 
exposure information from the National Occupational 
Hazard Survey) . 

Mazzuzkelli interview, supra note 164; Stein interview, 
supra note 123. 

Comment, The Significant Risk Requirement in OSHA 
Regulation of Carcinogens: Industrial Union Department, 
AFL-CIO V. American Petroleum Institute, 33 Stan. L. Rev. 
551, 564 n. 68 (1981) . 

Seminario interview, supra note 131. For example, the 
priority list that OSHA promulgated as part of its 
carcinogen policy was based upon some studies of very 
dubious quality. Sevin interview, supra note 133. 



OSHA RULEMAKING 153 



the model produces are of dubious validity, the prioritization 
list that it yields is of doubtful utility. 

A third disadvantage of the risk-assessment based listing 
approach is the fact that it implicitly requires a comparison 
of different health effects end-points. Should a chemical that 
causes three cancers per year be given a higher priority than a 
chemical that causes three thousand cases of contact 
dermititis? Should a standard addressing reproductive effects 
be giving higher priority than a standard addressing foot 
injuries? Quantitative risk assessment, as such, does not 
answer these difficult questions .^-*-^^ At the very least, 
then, the risk assessment-based listing approach can only yield 
several different lists based on different end points or a 
single list that reflects an implicitly determined weighting 
factors for various end points. 

Finally, the risk assessment-based listing approach does 
not incorporate administrative, economic and technological 
feasibility considerations. For example, OSHA might possibly 
reduce a large number of relatively minor risks by an easily 
complied with rule that it could enact without much controversy 
and at minimal administrative expense. In the overall scheme 
of things, that rule might be more effective than a high-stakes 
effort aimed at a very important chemical that will require a 
burdensome public hearing, controversy with 0MB, and judicial 
review that might result in no standard at all. 

b. Megascoring Devices. 

Megascoring prioritization devices attach quantitative 
scores to identifiable aspects of potentially hazardous 
workplace conditions and then total the scores to achieve a 
"megascore" by which the hazards are ranked .^-*-^'' The 



Sevin interview, supra note 133 



Sevin interview, supra note 133. See United States 
Environmental Protection Agency, Hazardous Air Pollution 
Prioritization System (1982) (megascoring system for 
ranking hazardous air pollutants); 45 Fed. Reg. 75488 
(1980) (relatively unsophisticated megascoring system for 
ranking pesticides relying entirely on production volumes 
and projected exposures to humans and fish); 47 Fed. Reg. 
31219 (1982) (Hazard Ranking System for cleanup of 
hazardous waste sites); 42 Fed. Reg. 55026 (sophisticated 
megascoring system for determining testing priorities for 
chemicals); Final Report of the OSW Regulatory Priorities 
Workshop (1985) (subjective scoring of regulatory 
activities required by recent amendments to Resource 
Conservation and Recovery Act); Schwartz, supra note 135, 
at 48 (Consumer Product Safety Commission's Consumer 
Product Hazard Index) . 



154 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Interagency Testing Committee, which is charged by statute with 
recommending chemicals to EPA for further health and 
environmental testing, relies heavily on such a scoring device 
to rank chemicals .-^-^-^'' Megascoring devices can use 
information that is more easily available than the information 
that is necessary for quantitative risk assessment. For 
example, production quantities might be used as a rough 
surrogate for actual worker exposure. Because they are less 
resource-intensive than risk assessment-based listing 
approaches, megascoring devices can be applied to a larger 
universe of workplace hazards. 

The scores that are attached to various aspects of 
workplaces are expressed quantitatively, but they may be 
qualitative in origin. For example, scores can be adjusted to 
reflect the degree of confidence that the agency has in the 
quality of the available evidence. Similarly, subjective 
considerations like the relative weight to be given to 
different health effects end points can be incorporated by 
assigning different scores to different end points. Finally, 
megascoring devices can incorporate administrative, economic 
and technological feasibility considerations into the ranking 
scheme by attaching scores to those aspects of rulemaking 
topics . 

The greatest disadvantage of megascoring devices is their 
inaccuracy. Since they are based upon surrogates for real data 
and since they rely heavily upon subjective considerations, the 
user of a megascoring device cannot be confident that the 
device has listed workplace hazards in the order of decreasing 
hazard. For example, it is difficult for megascoring devices 
to take into account the extent to which workers are protected 
by existing standards. Scores based solely upon toxicity might 
indicate a large hazard, even though current standards or 
practices reduce that hazard considerably .^-^-^'^ Much of the 
information needed for even a rudimentary scoring exercise is 
in the hands of EPA and NIOSH and is not easily accessible to 
OSHA; nor does OSHA have the control over the details of 
producing the data necessary for putting it in an easily usable 
form.-^^^ 

Like the risk assessment approach, megascoring does not 
leave room for overt political considerations. Although 
subjective factors play a role, they are all relevant to the 
primary task of locating the worst actors in a technical sense. 
The megascoring device does not address the political needs of 
the agency leadership. The device could rather easily be 



-^-^-^^ Sevin interview, supra note 133. See also Peat, Marwick 
Report, supra note 206. 

-^-*-^^ Wright interview, supra note 142. 

-^-^-^^ Sevin interview, supra note 133. 



OSHA RULEMAKING 155 



adjusted to incorporate political concerns, such as the 
intensity of congressional, 0MB and beneficiary group interest, 
by assigning additional scores to those factors, but the very 
statement of this possibility suggests its impract icality . The 
fact that the agency explicitly factored the reactions of 
congressional subcommittees and the White House into a 
prioritization model would at some point become a matter of 
public record, inviting inquiries into how the agency derived 
the quantitative measures of displeasure. 

3. Prioritization by Committee. 

Much government work is done by committees specially 
charged with accomplishing certain tasks. Following this 
pattern, OSHA could establish a committee to set its 
priorities, subject to review by the Assistant Secretary. 
There are several variations of the committee approach, ranging 
from a committee of upper level management making ad hoc 
decisions (which would be virtually indistinguishable from the 
ad hoc management approach) to a committee of outside experts 
assigned to draw up a priority list for the agency (which would 
in many ways be indistinguishable from the numerical scoring 
and risk assessment approaches). The discussion that follows 
will assume that the committee is composed of persons with 
technical competence and persons who are sensitive to political 
considerations. The committee would meet regularly to 
establish agency priorities on the basis of past priorities and 
new considerations that arise in the interim between meetings. 
Agency staff would provide the committee with profiles of 
various chemicals summarizing the existing information on 
chemical risks and if available ease of avoiding those risks. 

The committee approach has been adopted in numerous 
regulatory settings that are very similar to OSHA 
standard-setting. For example. Congress established an 
Interagency Testing Committee to prioritize and chemicals for 
required testing under the Toxic Substances Control Act.-^-*-^^ 
The Office of Toxic Substances uses the committee approach in 
prioritizing candidate chemicals in the premanuf acture 
notification process under the Toxic Substances Control 
Act.^-^-^^ NIOSH is currently adopting a committee approach 
toward setting its own priori ties .^-^-^'^ 

The committee approach preserves much of the flexibility 
of the ad hoc management approach while at the same time 



2 2 0/ 



2 2 



Peat, Marwick Report, supra note 206, at IV. 11. 

Sevin Interview, supra note 133; The NIOSH Priority Topic 
System (Briefing Paper prepared by NIOSH for OSHA's 
Health Standards Directorate.) 



156 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



incorporating technical expertise into the priority setting 
process. The committee could change priorities, based on new 
information, new assessments of old information, judicially 
imposed deadlines, and changed political circumstances. At the 
same time the agency's priorities would be stated explicitly at 
the end of each meeting, so that beneficiaries and regulatees 
would be aware on a continuing basis of the status of relevant 
topics . 

The committee approach gives upper level management the 
chance to relay some good news to petitioners -- viz. that the 
petition has been referred to the prioritization committee 
which will determine where the matter ranks among the agency's 
overall priorities. The agency would also have a response to 
judicial actions. It could say that a committee has been 
appointed to set priorities, the committee has considered the 
petition, and the committee has for the time being ranked it as 
a low priority. In other words, the committee approach would 
allow activities in through the side window, but it would 
concentrate primarily on the front door items. Finally, the 
continuity that could be expected from the committee approach 
would also reduce the risk of wasting agency resources on 
reinvigorating previously moribund proj'ects. The Committee 
could be charged with terminating old projects as well as with 
initiating new ones. 

Technical input could be ensured by appointing 
knowledgeable technical people to the committee and by 
requiring the committee to focus closely on chemical hazard 
profiles. The committee could likewise use the results of 
available risk assessments and multiscoring exercises in its 
deliberations. For example the Office of Solid Waste in EPA 
has adopted a committee approach to prioritizing the regulatory 
activities over which the agency has some control. Agency 
analysts recently had the members of the committee engage in a 
megascoring exercise in which members of the committee were 
asked to assign relative weights ranging from one-to-five for 
various aspects of hazardous waste regulation, including the 
hazard of the particular waste, number of operators, 
probability of human exposure, ease of implementation, 
administrative resource requirements, overall societal resource 
requirements, and interprogram effects. The committee's 
responses were averaged to provide a team weighted average, 
which was then applied to quantitative information that the 
staff possessed about 37 potential rulemaking activities to 
come up with a ranked list of the 37 activities .^-^-^^ 

The committee approach does have some disadvantages. By 
turning priority setting over to a committee, upper level 
management loses some control over the agency's agenda. Less 



^-^-^^ Telephone Interview with Dale Ruhter, Branch Chief, 

Economic Analysis Branch, Waste Management and Economics 
Division, Office of Solid Waste, EPA (November 20, 1986). 



OSHA RULEMAKING 157 



politically accountable members of the committee will make 
decisions that in practical effect bind the agency, even though 
upper level management has the final say. The agency has in 
the past experienced some difficulties with "renegade teams" 
that seek to implement policy preferences of lower level staff 
that differ from those of the politically accountable senior 
staff. Sometimes members of renegade teams feel so strongly 
about policy issues that they take their case to the press, 
rather than keeping the policy debate within the confines of 
the agency. This potential is reduced, however, if the 
committee contains agency employees who are likely to be 
responsive to upper level management's wishes or if upper level 
management is included in the committee. Finally, the 
Assistant Secretary would, of course, have the power to amend 
the committee's priority list, but that amendment would be a 
matter of public record. 

Other disadvantages of the committee approach are the 
problems that afflict any group decisionmaking device. For 
example, committees can become afflicted with the 
vision-narrowing disease referred to in the public policy 
literature as "groupthink. " The committee must have a chairman 
who is willing to bring matters to closure. Since the 
committee would be more in the nature of a decisionmaking 
entity than a study committee, it would have to decide how it 
would address the absence of consensus and whether dissenting 
opinions would be allowed or encouraged.-^-^-^^ 

C. Recommendations. 

We strongly recommend that OSHA establish a procedure for 
priority-setting for its rulemaking activities. Since OSHA 
does not currently have a priority-setting mechanism in place, 
this will require additional resources or a reprogramming of 
existing resources. The agency's resources (particularly in 
the Health Standards Directorate) are so thinly stretched that 
it would be better to secure additional resources for a 
priority-setting entity ,^-^-^'' which might be lodged in the 
Policy Directorate. In the past, OSHA has on occasion assigned 
to a single staff employee the job of coming up with a 



2 2 3/ 



Consensus would no doubt be impossible on the 
controversial and policy-dominated questions that the 
committee would have to decide. There probably should 
not be a requirement that the committee reach consensus 
Seminario Interview, supra note 131. 

Harwood Interview, supra note 138; B. White Interview, 
supra note 59; Telephone interview with Jennifer Silk, 
Directorate of Health Standards Programs, OSHA (October 
24, 1986); Stein Interview, supra note 123. 



158 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



prioritization scheme, but this has always been one of many- 
jobs for which that staff person had responsibi lity .^-^-^^ 

RECOMMENDATION: OSHA should make priority-setting a high 
priority. The agency should consider devoting at least 
one full-time staff person to the task, and the priority 
setting unit should be given sufficient resources to 
gather information on candidates for priority lists and to 
perform risk assessments and megascoring exercises. 

The Committee approach seems the most promising of the 
three approaches discussed above. It has many of the 
advantages of the other two approaches and fewer of the 
disadvantages. Therefore, 

RECOMMENDATION: OSHA should establish a permanent 
prioritization committee charged with drafting an initial 
ranked list of agency priorities from the 47 topics that 
resulted from the standards improvement project and the 
pending rulemaking petitions. The committee should be 
further charged with meeting on a continuing and periodic 
basis to re-examine the existing list, add items to it, 
and remove items from it. To preserve badly needed 
continuity, committee membership should not turn over any 
more rapidly than once every three years, and committee 
members should be eligible for reappointment. 

The membership of the committee should reflect both 
technical expertise and political sensitivity. One way to 
ensure this would be to make the Committee a formal advisory 
committee composed of nonemployees consisting of technical 
experts and representatives of a broad range of constituency 
groups. Such a committee could not, however, be an actual 
decisionmaking entity; it could only make recommendations to 
agency management. Alternatively, the committee could be 
composed of agency employees from various offices in the agency 
and chaired by a very high level agency employee, such as one 
of the Deputy Assistant Secretaries. 

One variety of the committee approach that has often been 
attractive to agencies engaged in scientific rulemaking is the 
outside committee of experts appointed by the National Research 
Council of the National Academy of Sciences (NAS) .^-^-^^ NAS 
committees have helped set priorities for drug regulation, 
pesticide regulation, drinking water standards, and numerous 



See generally Grobstein, The Role of the National Academy 
of Sciences in Public Policy and Regulatory Decision 
Making, in Law and Science in Collaboration 115 (Nyhart & 
Carrow eds . 1983) . 



OSHA RULEMAKING 159 



other governmental activities. The primary advantages of this 
approach are that it brings very high quality expertise to bear 
on the problem and that it can diffuse political heat. When 
the agency's prioritization decisions are challenged, it can 
simply point to the committee of experts and suggest that no 
single challenger (who usually has some kind of economic 
interest in the outcome) is qualified to second guess the 
highly expert and objective committee. 

The chief drawback of the NAS committee is the fact that 
these policy-laden decisions cannot be made on a purely 
scientific or technical basis. There is no good reason for the 
agency to cede control over (and responsibility for) its 
priorities to a panel of outside experts. The experts may have 
their own policy agendas, which may differ from those of the 
agency. Other disadvantages are the expense of assembling and 
maintaining a semi-permanent committee and the time that would 
inevitably pass before the committee, which would be composed 
of persons working on a very intermittent basis, could report 
back to the agency. A scientific committee would want to 
deliberate very carefully before writing a list that might have 
grave economic consequences. Many members of the committee 
would have to be educated on the specifics of the information 
on particular workplace hazards. As a realistic matter, it 
would probably take at least 3-4 years for an NAS committee to 
come up with an initial list. OSHA may not have the time or 
resources to support that endeavor. 

RECOMMENDATION: OSHA should establish a prioritization 
committee made up of OSHA employees with nonvoting 
representatives from NIOSH and EPA. The committee should 
be composed of high level management staffers at at least 
the Deputy Director level and highly regarded health 
professionals from the agency's technical staff. The 
meetings, which would discuss policy as well as technical 
considerations, should be closed to the public, but the 
results of the meetings should be made public, after the 
Assistant Secretary has had an opportunity to consider and 
overrule any decision made by the committee. 

If the committee is established in accordance with the 
above recommendation, its first task of drafting an initial 
ranked list will be quite burdensome and no doubt 
controversial. One possible device to aid the committee in 
this initial task would be to hold one or more "consensus 
workshops" that all committee members would attend and during 
which all of the relevant interest groups would attempt to 
agree on a consensus list of priorities .-^-^-^^ For example, 
NIOSH recently held a national strategy workshop to help that 



Seminario Interview, supra note 131. 



160 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Similarly, the 

Keystone Center has been successful in conducting consensus 
workshops on technical issues relevant to questions of public 
policy concerning natural resources. The consensus may fall 
apart as the group proceeds down the list, but there may well 
be a fair degree of consensus about what topics should be at or 
near the top of the list. 

RECOMMENDATION: Prior to establishing on initial priority 
list, OSHA should hold one or more consensus workshops at 
which relevant interest groups would be asked to agree 
upon a consensus list of priorities. 

The Committee should use existing risk assessments in 
establishing its initial prioritization list and in undertaking 
subsequent modifications, but it should be aware of the 
drawbacks of risk assessments, and it should not allow risk 
assessments alone to determine priorities. Existing 
megascoring schemes are so laden with pitfalls that the 
Committee should devote little attention to them. If the 
Committee is to perform its ambitious task expeditiously, it 
must resist the temptation to develop its own megascoring 
device and proceed ahead with whatever information is 
conveniently available on the application of existing 
megascoring devices to relevant chemicals. The Committee 
should likewise resist the temptation to incorporate by 
reference lists of toxic chemicals that have been developed for 
other purposes. While such lists may be helpful in defining 
the universe of hazards upon which the agency will draw in 
promulgating its own priorities list, the entity should do its 
own work. 

RECOMMENDATION: The entity that establishes agency 
priorities should use existing risk assessments, as well 
as other technical and policy considerations, in carrying 
out its task. It should not commission full-blown risk 
assessments in setting the initial priorities list, but it 
may decide to develop more sophisticated risk assessments 
in modifying the list. The entity should not develop its 
own megascoring device for setting priorities, and it 
should not incorporate by reference lists prepared by 
other agencies for other purposes. 

OSHA can expect resistance to any explicit priority list 
from the regulated industry for reasons other than a company's 
natural reluctance to be the subject of an OSHA standard. No 
company is happy to see a chemical that it deals with labeled a 
"bad actor," even if regulatory consequences never flow from 



OSHA RULEMAKING 161 



that determination.-"-^-^ For example, an OSHA priority list 
might trigger products liability lawsuits .-^-^-^^ In addition, 
industry lawyers sometimes refer to the "tyranny of lists," 
pointing out that one agency's list prepared for a limited 
purpose may get adopted by another agency for an entirely 
different purpose .^-^-^"^ OSHA might also anticipate opposition 
from beneficiary groups that believe that hazards relevant to 
their interests are too far down the priority list. 

The agency can reduce the opposition of outside groups to 
an explicit list somewhat by grading chemicals and other 
hazards, rather than ranking them in numerical order. For 
example, rather than ranking 50 potentially hazardous chemicals 
on a scale of 1 to 50, the committee could divide the 50 into 
10 "top priority" chemicals, 10 additional "very high priority" 
chemicals, 10 additional "high priority" chemicals, 10 
additional "middle priority" chemicals, and 10 additional "low 
priority" chemicals. New chemicals that come to the agency's 
attention through new studies or petitions could be assigned 
one of the five priority rankings, and the rankings of 
chemicals on the list could change as new information became 
available to the agency and as it completed rulemaking with 
respect to its top priority chemicals. 

The agency should take the firm position that the 
Committee's priority ranking lists are merely internal aids to 
setting the agency's rulemaking agenda and are not themselves 
rules subject to notice and comment procedures. The agency 
should strongly avoid creating the impression that the list is 
in any way a "declaration of hazard; "-^-^-^"^ rather, OSHA 
should stress the tentative nature of the list, pointing out 
that placing a chemical or workplace on the list in no way 
obligates the agency to take regulatory action. 

Because outside parties may have information that could be 
important to the agency's ranking decision, the committee 
should invite public comment on the committee's work, and the 
committee should be open to changing the ranking in light of 
the comments. But the agency should take the position that 
informal rulemaking procedures are not required, and it should 
strongly resist judicial review of the prioritization 



Kronenbush Interview, supra note 122. 

King Interview, supra note 162. 

For example. Section 101 of CERCLA defines as a 
"hazardous substance" any substance that is listed on one 
of several lists of substances prepared pursuant to 
several other statutes. 

Sampson Interview, supra note 134. 



162 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



list.^-^-^'' If the evolving list is subject to judicial review 
upon initial promulgation or upon amendment, then the attendant 
delays may defeat the purpose of the entire exercise. 

There is a sound legal basis for this position. A 
challenge to the list would probably not be ripe for review 
until the list is applied in an individual case to initiate a 
rulemaking action, in which case judicial review would only be 
appropriate at the end of the rulemaking activity. In applying 
the judicial doctrine of ripeness, the courts evaluate the 
fitness of the relevant issue for judicial decision at the time 
that it is raised and the hardship to the parties of witholding 
judicial consider at ion. -^^-^^ The relative position of a 
particular hazardous substance on the list proposed here is not 
generally appropriate for judicial consideration. The list 
would be based on a combination of technical and policy 
considerations for which there is little statutory guidance 
other than a general statutory preference for addressing the 
most hazardous workplaces f irst .-^-^-^'^ Like the decision not 
to prosecute a law violator ,^-^-^^ the decision where to rank 
a substance on a priorities list is highly discretionary and 
not generally amenable to judicial second-guessing. In 
addition, since the list would be subject to change by the 
proposed committee in light of new information and changed 
policy considerations, there is no particularly appropriate 
time for evaluating the "correctness" of the list. Rather than 
seeking judicial review of the list, a party with an interest 
in the list should petition the agency to change it. Finally, 
it is difficult to see how a party with an interest in a 
substance on the list can suffer much hardship from the mere 
presence of that substance on the list, especially if the 
agency is careful to maintain the position that the presence of 
a substance on the list in no way commits the agency to take 
any regulatory act ion. ^-^-^'^ On the other hand, review of the 



I 



^-^^^ The Administrative Conference has recommended that 
agencies consider rulemaking procedures for 
priority-setting systems, but "more informal methods are 
appropriate for ranking individual chemicals for 

(Continued on next page) 

^^-^^ Abbott Laboratories, Inc. v. Gardner, 387 U.S. 136, 
148-49 (1967). See 4" K. Davis, Administrative Law 
Treatise § 25:6 (1983) . 

^-^^ 29 U.S.C. § 655(g) . 

^^-^^ See Heckler v. Chaney , 105 S.Ct. 1649 (1985). 

^^-^'' See State of Texas v. United States Dept . of Energy, 764 
F.2d 279 (5th Cir. 1985) (designation of two sites as 

(Continued on next page) 



OSHA RULEMAKING 163 



list itself would pose a great hardship to OSHA and affected 
workers, because the workers would be exposed to hazards for 
the full period of judicial review of the list before OSHA 
could begin to undertake protective act ion. -^-^-^^ 

RECOMMENDATION: The entity that establishes agency- 
priorities should publish and allow public comment upon a 
proposed list of 50-75 rulemaking topics. The list should 
either rank the topics individually or assign them to 
classes. OSHA should take the position that the list is 
not a final rule for which judicial review would be 
appropriate . 

Assuming that a court did decide to review the list in 
isolation, it is highly unlikely that it would overturn a 
reasonable scheme, even if OSHA could not support it with hard 



2 3 3/ 



2 3 7 



(Continued from previous page) 
evaluation and regulation. ACUS Recommendation No. 82-5, 
1 C.F.R. §305.82-5. 

(Continued from previous page) 

potentially acceptable sites for a nuclear waste 
repository not ripe for judicial review) . 

See J.V. Peters & Co. v. EPA, 767 F.2d 263 (6th Cir. 
1985) (EPA action to clean up hazardous waste dump not 
ripe for review at request of party who might later be 
sued for respose costs; court stresses harm that lengthy 
judicial review would pose to the environment). The 
recent D.C. Circuit opinion in Eagle-Pitcher Industries, 
Inc. V. EPA, 759 F.2d 906 (D.C. Cir. 1985) is not to the 
contrary. In that case the petitioners did not file a 
challenge to the EPA's Hazard Ranking System for 
hazardous waste dumps until after the 90-day statutory 
period for seeking judicial review had run. Petitioners 
claimed that the challenge to the system was not ripe 
when EPA promulgated regulations implementing the system 
and that it did not become ripe until EPA used the system 
to promulgate a National Priorities List. The court 
rejected this argument, but at the same time implicitly 
held that arguments concerning the list were ripe at the 
time that the suit was finally filed. The agency's 
statute specifically required that the agency promulgate 
the list by regulation, the statute specified rather 
specific criteria for creating the list, and the statute 
provided for judicial review of regulations. The 
priorities list proposed here is not required by statute, 
and it would not be a regulation. Rather, it would be an 
internal aid to guide the agency staff in allocating 
resources . 



164 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



data and analysis. Perhaps the closest case in point is 
Eagle-Pitcher Industries, Inc. v. EPA ,^-^-^^ in which the D.C. 
Circuit upheld EPA's hazard ranking system and national 
priorities list for prioritizing waste sites for action under 
the Comprehensive Environmental Response, Compensation and 
Liability Act. Pursuant to statute, EPA prepared a list of 400 
sites that were contaminated by hazardous substances. To 
accomplish this job, EPA, after notice-and-comment , promulgated 
a Hazard Ranking System (HRS), which was designed to estimate 
the potential risks of hazardous substances releases. The HRS 
was a megascoring device that relied fairly heavily upon risk 
assessment. Analyzing three pathways for release of hazardous 
substances, the HRS took account of three factors (likelihood 
of release, toxic characteristics of the substances, and the 
population or sensitive environments that were threatened) that 
in turn incorporated other factors. EPA acknowledged that the 
HRS contained many imperfections and that the resulting 
National Priorities List incorporated those infirmities. 
Nevertheless, the court rejected attacks on the system and held 
that it was not arbitrary and capricious. 

The court first rejected the contention that the list had 
to contain the 400 most hazardous sites. The court agreed with 
the agency that the statute permitted it "to establish a lower 
minimum level of certainty that a release or potential release 
poses a threat for purposes of listing on the NPL than for 
actually taking government act ion. "-^-^-^^ The court further 
agreed with the agency that the standards for placing a site on 
the list and the standards for ordering cleanup of a site were 
not identical. The court recognized that in deciding whether 
to list a site, EPA would have to rely upon the little 
information that was available at the time: "Clearly, the 
EPA's decision to reconcile the need for certainty before 
action with the need for inexpensive, expeditious procedures to 
identify potentially hazardous sites by establishing different 
threshold criteria for action and for listing is reasonable and 
fully in accord with congressional intent . "-^-^-^^ 

The court also rejected petitioners' argument that the HRS 
was arbitrary and capricious. In particular, the court was 
unimpressed with petitioners' argument that because the HRS was 
designed primarily with chemical substances in mind, it could 
not be applied to releases of mining wastes. The court did not 
delve deeply into EPA's detailed responses to the challenges to 
the HRS. Stressing the fact" that the agency must be prepared 
to explain the assumptions and methodology of its models, the 
court stated that it must ultimately "defer to the agency's 



^-^'^ 759 F.2d 905 (D.C. Cir. 1985) 
^^^^ Id. at 919. 
^-^^^ Id. at 921. 



OSHA RULEMAKING 165 



decision on how to balance the cost and complexity of a more 
elaborate model against the oversimplification of a simpler 
model. "^^^^ 

The committee and its staff should begin with a relatively- 
long list of potential candidates for its priority list and it 
should at the end of a relatively short period of time (perhaps 
six months) produce a ranked or graded list for circulation and 
comment. After the first list has been completed, the 
committee should continue to monitor scientific reports and 
other developments for information that might cause the agency 
to change the list. In particular, the committee should have 
systematic access to reports from the field for indications 
that issues not on the list deserve greater agency attention. 
OSHA should therefore continue its efforts to make information 
from the field more accessible to agency decisionmakers. 

To preserve needed flexibility, OSHA should establish an 
additional "side window" for workplace hazards for which 
important policy considerations warrant rapid treatment .-^-^-^'' 
Petitions for rulemaking and TSCA referrals would then be 
treated as petitions to amend the current priorities list to 
which OSHA would respond within a definite time period (perhaps 
120 days) .^-^-^-^ OSHA could promulgate procedural regulations 
governing petitions and TSCA referrals specifying criteria for 
giving expeditious treatment to a topic rather than proceedings 
through the normal (and presumably slower) process of regular 
committee deliberations on the status of the priorities list. 
Such criteria might include: (1) the degree of hazard; (2) the 
quality of the data indicating hazard; (3) the administrative 
resources required to undertake the new project; (4) the match 
between the expertise required for the project and the 
expertise available to the agency ;-^-^^^ (5) whether the 
proposed project would result in greater protection for workers 



^-^-^'' Id. at 921, quoting Small Refiner Lead Phasedown Task 
Force v. EPA, 705 F.2d 506 (D.C. Cir. 1983). 

-^-^-^^ Seminario Interview, supra note 131; Sampson Interview, 
supra note 134. For a description of a "fast track" 
system for addressing rulemaking petitions at the Nuclear 
Regulatory Commission, see Luneberg, supra note , at 
86-88. Petitions on the "fast track" must be answered 
within 90 days, and a favorable response results in a 
notice of proposed rulemaking, rather than the typical 
notice of receipt of petition. 

-^-^-^^ The ability of EPA to specify a response time for TSCA 
referrals might confound OSHA ' s attempt to establish a 
definite deadline, but EPA and OSHA should be able to 
agree to a sensible limit such as 120 days. 

-^-^-^^ Mazzuzkelli Interview, supra note 164. 



166 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



than projects currently at the top of the list; and (6) other 
important public policies (allowing room for delicate political 
considerations) . 

The side-window process could rely heavily upon the 
committee suggested earlier. The appropriate side-window 
vehicle might be a petition to amend the list. OSHA could, for 
example, promulgate regulations governing petitions for 
rulemaking that would require a showing from the petitioner 
that the subject of the petition warranted more rapid treatment 
than the other projects on the priorities list. The committee 
could then examine the reasons and any other outside comments 
on the petition in deciding whether to amend the priorities 
list. 

Since policy considerations weigh very heavily in 
decisions whether to change agency priorities, OSHA may prefer 
to have a side-window vehicle available that does not rely upon 
a committee, especially if the original prioritization 
committee includes outsiders. Petitions could, for example, be 
directed to the Assistant Secretary or some high level entity 
composed of a Deputy Assistant Secretary, the Directors of the 
relevant Directorates and other relevant support staff. This 
alternative would allow the persons most directly accountable 
for the use of agency resources and those most sensitive to the 
political process outside the agency to make the decision 
whether a topic is sufficiently "hot" to leapfrog other topics. 

Whether OSHA allows a quasi-expert committee or a high 
level internal entity to implement the side-window procedure, 
it should provide explicit public responses to petitions to 
change priorities, and these responses should give the reasons 
for accepting or rejecting such petitions. The side window 
must not become the dominant source of rulemaking initiatives. 
Its very nature means that the agency's responses to side 
windov? petitions will be less easily explained than the more 
quantitative "front door." In the final analysis, this means 
that the agency must show the public, and especially 
beneficiaries, that the more rational "front door" process does 
in fact work, bringing rulemaking initiatives to completion on 
a regular basis. In other words, OSHA must manage the 
rulemaking process in such a way that the front door is not 
perceived to be a "black hole" into which rulemaking efforts 
enter, never to be heard from again. 

RECOMMENDATION: OSHA should establish a process for 
expediting prioritization decisions for topics that are 
the subject of TSCA referrals, rulemaking petitions, and 
intense pressure from Congress, 0MB, and the White House. 
Although this expeditious process should be separate from 
the agency's routine prioritization process, it should be 
closely integrated with the routine process. The outcome 
of the expedited process should be the placement of the 
topic on the priority list or a determination not to 
proceed ahead with the project and a public explanation 



OSHA RULEMAKING 167 



for the action. 

Once OSHA establishes a workable process for prioritizing 
future projects that is sufficiently flexible to address 
legitimate requests for priority changes and once OSHA begins 
to implement that process consistently, it should have little 
to fear from a lawsuit requesting a court to order it, in 
effect, to move a project to the top of the list. The agency 
can simply reply that it has an orderly process for ranking 
projects and a flexible way to hurry up individual projects 
when speed is necessary, and the petitioner's project has been 
assigned a place on the agency's agenda. The burden should 
then be on the petitioner to demonstrate why its proposed 
project warrants special treatment. 

OSHA should attempt to coordinate its priority-setting 
activities with NIOSH.-^-^-^^ Congress clearly intended in 
section 6(g) of the Occupational Safety and Health Act that 
NIOSH play a role in providing the technical basis for OSHA 
priority setting .^-^^^ OSHA should solicit NIOSH's input in 
assembling an initial prioritization list. If, for example, 
OSHA decides to establish a committee to set priorities, it 
should appoint an official from NIOSH to a position on the 
committee. OSHA should communicate its priorities at a very 
early stage, so that NIOSH may schedule its projects to 
complement OSHA's rulemaking efforts. More importantly, OSHA 
should attempt to adhere to its original prioritization plan as 
closely as possible to avoid the frustration that NIOSH 
staffers feel when they prepare a criteria document for a 
substance only to be told that it is no longer a high OSHA 
priori ty.-^-^-^^ OSHA will never be able to adhere completely 
to any set prioritization scheme. Changes in priorities will 
be necessary to meet changed political conditions and crises 
brought on by new information. Therefore, OSHA should work 
with NIOSH to add some flexibility to NIOSH's schedule. In 
particular, NIOSH should maintain a capacity to respond on a 
"fast track" to OSHA requests for technical help on projects 
that come through the "side window." Most importantly, OSHA 
and NIOSH should be in constant communication so that NIOSH may 
adapt to changes in OSHA's priorities .-^-^-^^ 



^-^-^'^ See Delays in Setting Standards, supra note 49, at 21 
(recommending that OSHA and NIOSH work together in 
establishing priorities) . 

^^^^ 29 U.S.C. §655(g) . 



2 4 



2 4 9/ 



Mazzuzkelli Interview, supra note 164; Sevin Interview, 
supra note 133. 

Mazzuzkelli Interview, supra note 164. 



168 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



RECOMMENDATION: OSHA should include NIOSH in drafting its 
initial priority list and it should make NIOSH aware of 
all changes to that list. OSHA should work with NIOSH to 
establish a capacity in NIOSH to respond rapidly with 
information on projects that are assigned to move on a 
fast track through OSHA. 

OSHA should also coordinate carefully with the National 
Toxicology Program (NTP)-^^-^'' and EPA concerning OSHA's 
future information needs. Both NT? and EPA have the capability 
of generating new information on suspect chemicals, a capacity 
that OSHA lacks .^-^-^'^ If OSHA could arrive at a priorities 
list that extended three or four years in the future, it could 
approach NTP or EPA to initiate studies on the chemicals that 
would be the subjects of future rulemaking initiatives. OSHA 
should also coordinate with EPA on regulatory matters when 
OSHA's authority to protect works may not be as effective as 
EPA's authority to regulate chemicals .-^-^-^^ 

RECOMMENDATION: OSHA should attempt to enter into a 
formal interagency agreement with EPA and NTP for making 
EPA and NTP aware of OSHA's needs for testing toxic 
substances to which workers are exposed. OSHA should also 
attempt to enter into a formal interagency agreement for 
coordinating the exercise of the authorities of the two 
agencies in a way that most effectively protects employees 
from workplace risks. 

Although OSHA has undertaken some modest informal efforts 
in the last six years to coordinate with other agencies, there 
is no formal institutional entity with the capability of 
ensuring appropriate communication and forcing necessary 
cooperation. The interaction that does occur is often at lower 
levels where bureaucratic turf considerations overwhelm the 
current meager incentives to cooperate. For example, EPA 
employees are inclined to regard OSHA scientists as less 
competent than EPA scientists, and OSHA personnel generally 
believe that EPA scientists and engineers do not know much 



250. 



The National Toxicology Program is a multi-agency 
chemical testing program housed in the Department of 
Health and Human Services. It accepts nominees from 
regulatory agencies for testing chemicals for health 
effects. The purpose of the program, which was 
established in the late 1970s, was to coordinate 
governmental needs for health and safety testing of 
potentially dangerous chemicals. 



Seminario Interview, supra note 131. 



OSHA RULEMAKING 169 



about the workplace .^^-^'' A 1982 Recommendation of the 
Administrative Conference encouraged interagency coordination 
in identifying, evaluating and regulating potential human 
carcinogens, stressing that "[e]ffective coordination can 
reduce governmental costs, minimize inconsistency among the 
agencies, and better illuminate the economic costs of 
alternative control opt ions .-^-^-^^ During the Carter 
Administration, an Interagency Regulatory Liaison Group, which 
was composed of the heads of OSHA, EPA, FDA, CPSC, FSIS, 
provided the institutional impetus to cooperate. OSHA should 
pursue the possibility of reviving the IRLG or of creating a 
similar entity to perform the coordination function suggested 
here . 

Establishing an IRLG-like coordinating institution would 
require some additional resources in resource-scarce times, but 
the savings in avoided duplication alone should be worth the 
cost. The most foreboding obstacle to setting up such an 
institution is likely to be the Office of Management and 
Budget, which believes that it currently plays this 
coordinating role. The short answer to this objection is that 
0MB has had since the abolition of the old IRLG in 1981 to fill 
the gap, and it has not done so. Nor have other White House 
efforts to generate coordinated policies in the areas of 
regulating carcinogens and biotechnology met with great 
success. The coordination function for OSHA standard setting 
must be initiated and operated by the agencies themselves, and 
it must have the support and active participation of officials 
at the very highest levels of those agencies. 

RECOMMENDATION: OSHA and other health and environmental 
agencies, such as EPA, the Food and Drug Administration, 
the Food Safety and Inspection Service and the Consumer 
Product Safety Commission, should form a high level group 
charged with coordinating agency policies and information 
relevant to regulating health and environmental hazards. 



2 5 3 



254/ 



Seminario Interview, supra note 131. 
Recommendation No. 82-5, 1 C.F.R. §305.82-5 (1986) 



170 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



III. Management and Accountability. 

OSHA has always struggled with managing its rulemaking 
process expeditiously .^-^-^^ Although the extraordinarily 
lengthy interval between initiation and publication of OSHA 
rules has been the subject of negative commentary for years, 
the agency seems no closer to a solution than it was in the 
mid-1970's. Table III sets out in time-line form some of 
OSHA's important rulemaking efforts. The table strongly 
suggests that OSHA has a very difficult time meeting its own 
commitments for completing rulemaking efforts. The Generic 
Carcinogen Policy, described in Part II of this Report, had the 
potential to speed up the process for chemicals that 
demonstrated carcinogenic potential, but the Benzene case-^-^-^^ 
significantly reduced the impact of that approach when it 
imposed a requirement that OSHA demonstrate that workplace 
risks pose a "significant risk" before regulating. 

Although OSHA's management style has varied over the 
years, no single approach has successfully speeded up the 
agency's rulemaking efforts. This suggests that some of OSHA's 
problems may be systematic or externally imposed. However, 
OSHA can significantly improve its internal management, and 
such improvements should substantially reduce the incidence of 
grossly delayed rulemaking initiatives. This section of the 
Report will critically examine management and accountability 
problems in OSHA and explore some options for improvement. 

TABLE III 
SIGNIFICANT MILESTONES IN FIVE RECENT OSHA RULEMAKINGS 

Asbestos --Revision of 1972 Standard 

early 4/83: OSHA (Auchter) promises to issue NPRM in summer 
of 1983 (update of a 1975 proposal) and publish final 
rule in fall 1983 (as opposed to team's targets of 
June, 1984 and September, 1985 



11/2/83: Emergency Temporary Standard (0.5 standard) issued 
for 6 months 



See Delays in Setting Standards, supra note 49, at 23 
("The Occupational Safety and Health Administration did 
not have an adequate management information system and 
controls to identify and resolve the problems which 
delayed completion of standards.") 

448 U.S. 607 (1980) . 



OSHA RULEMAKING 171 



3/7/84: Fifth Circuit invalidates Emergency Temporary 
Standard 



3/29/84: OSHA (Strobel) promises NPRM within a week 



4/10/84: NPRM published (still undecided between 0.5 or 0.2 
f ibers/cm3 ) 



10/2/84: New Emergency Temporary Standard issues (0.2 to 
0.5) 



9/26/85: OSHA (Tyson) promises final standard by end of 
October, 1985 



10/17/85: OSHA advisory committee recommends 0.1 standard 
for construction industry 



6/13/86: Final standard promulgated (0.2 fibers/cm3) 

Benzene 



4/1/83: Report of OSHA intent to announce proposal for 
stiffer standards on 5/1/83 



4/14/83: Petition for an emergency temporary standard 



5/3/83: OSHA (Auchter) announces plans to promulgate 
standard by summer, 1984 (and to decide on 
emergency temporary standard within 3 or 4 weeks) 



5/2/83: OSHA promises ANPR within 2 weeks 



172 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



7/1/83: OSHA rejects emergency standard request 



7/8/83: OSHA (Auchter) proposes expedited rulemaking 
program, i.e., proposal by 11/83, hearings in 
2/84, final rule by 6/84 



3/84: OSHA says NPRM should be submitted to 0MB within 
few weeks 



4/12/84: OSHA predicts that it will take "another couple of 
months" before publishing NPRM. 



7/84: OSHA says that the preamble to proposed standard 
is being changed 



12/10/84: Suit filed in U.S. Court of Appeals, D.C. to 
compel OSHA to issue NPRM. 



3/19/85: Draft NPRM submitted to 0MB 
4/22/85: OSHA files response to suit 

5/20/85: OMB extends review of standard 'indefinitely' 

2/25/86: Court of Appeals, D.C. refuses to put OSHA on 
timetable: 14 month timetable contemplated by 
OSHA not "facially unreasonable" 



Ethylene Oxide 

1/5/83: District Court orders OSHA to promulgate Emergency 
Temporary Standard 



3/15/83: D.C. Circuit gives OSHA 30 days to propose tighter 
ethylene oxide standard. No firm timetable 
established, but court expects final rule within a 
year 



3/30/83: Draft NPRM (1 ppm) completed 



OSHA RULEMAKING 173 



4/15/83: OSHA issues NPRM in response to court order 



4/17/84: OSHA agrees (and court approves) to promulgate new 
standard by 6/15/84 



6/18/84: OSHA issues final rule 

Ethylene Dibromide 



fall/81: OSHA denies petition for Emergency Temporary 
Standard 



12/1/81: OSHA issues ANPR 



5/19/83: Risk assessment recommends reduction from 20 ppm 
to 0.1 ppm/STEL = 0.5 ppm 



6/22/83: Auchter letter promises NPRM rule to be issued by 
mid-summer, 1983 



9/13/83: Auchter testifies OSHA moving with all deliberate 
speed 



9/29/83: OSHA issues NPRM 



8/7/84: OSHA spokeswomen promises final rule in late fall 
1984 



Formaldehyde 



5/13/82: OSHA response to NIOSH concludes that there is 

insufficient evidence to support a more stringent 
standard 



8/25/82: UAW files complaint in D.C. Cir. seeking emergency 



174 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



regulation and charging OSHA with excluding 
necessary data from public record. 



8/15/83: UAW files motion for summary judgment in its 
action to force OSHA to promulgate emergency 
temporary standard 



5/84: EPA risk assessment indicates exposure would 
result in additional cancer cases 



7/2/84: Court orders OSHA to reconsider need for Emergency 
Temporary Standard 



7/2/84: OSHA tells court it needs until 12/15/84 for ETS 
reconsideration and until 4/15/85 for permanent 
rule reconsideration 



10/30/84: OSHA tells court it is 'behind schedule,' but will 
get decision on ETS made by 12/15/84 

11/84: OSHA releases "preliminary assessment" 

12/15/84: OSHA fails to meet deadline 

1/12/85: OSHA announces it will not issue ETS 

4/15/85: OSHA announces it is considering new rules 



5/7/85: OSHA says no justification for court ordered 
acceleration of rulemaking 



6/3/85: D.C. Circuit orders OSHA to take 'appropriate 

further action' toward issuing permanent standard 
by 10/1/85 



10/1/85: OSHA tells D.C. Circuit it needs extension til 



OSHA RULEMAKING 175 



12/1/85 



10/18/85: OSHA tells court it is not delaying unduly 



11/8/85: D.C. Circuit orders OSHA to promulgate NPRM by 
12/1/85 



12/3/85: OSHA issues NPRM (1.5 ppm) 



1/24/86: OSHA asks D.C. Circuit to deny UAW motion for 
final rule by 9/10/86 



A. Evaluation of the Current Rulemaking Management 
System. 

OSHA has traditionally been organized along functional 
lines, maintaining separate Directorships for Health Standards, 
Safety Standards, Technical Support, Field Operations, and 
Administrative Programs. Although OSHA has always had a 
separate office for "Administration," that office has generally 
been responsible for preparing agency budgets, maintaining 
agency facilities and operations, and administering the 
financial aspects of agency contracts. It has never played a 
role in managing rulemaking initiatives. In the late 1970s, 
OSHA created a separate Directorate for Policy and charged it 
with preparing economic feasibility studies and regulatory 
impact assessments. While this office plays a large role in 
agency rulemaking initiatives, it does not attempt to manage 
the process. 

OSHA is only one of many agencies in the Department of 
Labor, and it must clear important rulemaking actions at the 
Departmental level. The Department has always maintained a 
separate Solicitor's Office, apart from the individual 
operating agencies, to provide legal advice to all of the 
agencies within the Department .^-^-^'' The agencies do not have 
their own lawyers, and they are entirely dependent on the 
Solicitor's Office for legal advice. 

In its early years, OSHA was a very loosely run 
organization, and especially so in its rulemaking functions. 



The Solicitor's Office is also the designated contact 
with 0MB for all agencies in the Department. 



176 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Unlike other health and environmental agencies created in the 
early 1970s, OSHA faced few congressionally mandated 
deadlines .^-^-^^ Rulemaking initiatives were generated 
internally in an ad hoc fashion. The Directors for Health and 
Safety Standards assumed control of rulemaking initiatives with 
substantial and continuing input from the Assistant Secretary. 
Loose internal work groups were assembled to draft rulemaking 
documents with the aid of consultants .-^-^-^^ On at least one 
occasion (the original hazard identification regulation) an 
outside consultant (a university professor) was the de facto 
head of the work group. Since the agency undertook few major 
projects at any given time, the Directors themselves played a 
very substantial role in the drafting process, even to the 
point of typing the final version of a rule at 4:00 AM on the 
morning that it was due.^-^-^^ Clearly a process that devoted 
such large amounts of upper management time to individual rules 
was incapable of managing more than five or six major rules at 
any one time. As a practical matter, the tendency was for the 
entire agency to "gear up" for a single rulemaking effort, 
putting aside most other initiatives until the current effort 
reached a clear stopping point. ^-^-^^ The result was a fairly 
low production of rules. Even during the Carter 
Administration, when an activist Assistant Secretary headed a 
more activist agency, it completed very few rules in any given 
year. 

The change of Administrations in 1981 brought three 
significant organizational changes to OSHA. First, the 
Secretary of Labor took a much more active interest in OSHA 
rulemaking, and Departmental procedures were established for 
reviewing OSHA activities. Second, OSHA's new management hired 
a management consultant to prepare standardized written 
procedures for OSHA rulemaking that stressed documentation and 
upper level management input. Third, Executive Order 12291 
(and later Executive Order 12498) gave the Office of Management 
and Budget a significant review role that in some cases 
superceded the agency's own judgment and that in many cases 
significantly delayed the publication of proposed rules. 



standards within two years from the date of the statute's 
enactment. 29 U.S.C. §6(a). 

-^-^-^■^ Wrenn Interview, supra note 49; Gordon Interview, supra 
note 129. 



2 6 



2 6 1 



Wrenn Interview, supra note 49. 

Wrenn Interview, supra note 49; Gordon Interview, supra 
note 129. 



OSHA RULEMAKING 177 



The new Secretary of Labor in 1981 also revised 
Departmental procedures to establish a Department-wide Policy- 
Review Board to review all policy and regulatory initiatives 
and to facilitate upper level Departmental input into the 
regulatory process .-^-^-^'' The Secretary of Labor chairs the 
Policy Review Board and the Assistant Secretary for Policy 
serves as its Executive Director .^-^-^^ At the time that OSHA 
begins to devote staff or other resources to a rulemaking 
effort, current Departmental procedures require it to prepare a 
"Concept Analysis Paper" to inform Departmental officials and 
to aid in Departmental tracking of pending regulatory 
issues .-^-^-^^ After the agency has decided to initiate a 
rulemaking effort, it must prepare an Options Memorandum for 
the Policy Review Board .-^-^-^^ Based upon the Options 
Memorandum, the Policy Review Board must provide policy 
guidance before the agency may publish a Notice of Proposed 
Rulemaking.^-^-^^ 

1. The 1982 Regulation Management System. 

In 1982, OSHA developed its own Regulation Management 
System to complement the Departmental procedures for generating 
rules. ^-^-^^ The Procedural Directive that established the 



2 6 2 



See, Memorandum from Raymond J. Donovan to the Executive 
Staff on Improving the Management and Policy Processes 
Within the Department, November 17, 1982 [hereinafter 
cited as Improving Management Memo]; Memorandum from John 
Cogan to Members of the Secretariat of the Policy Review 
and Coordinating Committee on PRCC Operating Procedures, 
November 29, 1982 [hereinafter cited as PRCC Procedures 
Memo] . 

Its other members include the Secretary's Chief of Staff 
(who chairs the meetings in the Secretary's absence), the 
Under Secretary, the Solicitor, the Assistant Secretary 
for Administration and Management, the Assistant 

(Continued on next page) 

Memorandum from Raymond Donovan to Executive Staff on 
Departmental Decision Making Procedures -- Overall 

(Continued on next page) 

Departmental Procedures Memo, supra note 456, at 1. 

PRCC Procedures, supra note 454, at 2. 

OSHA Instruction RUL . 1 , March 1, 1982 [hereinafter cited 
as OSHA Instruction RUL.l]. 



178 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Regulation Management System strongly endorsed the position 
that rules should not be initiated or completed unless they 
addressed demonstrable significant risks, were based upon 
documented facts, and were cost effective. The Directive 
established a Regulation Review Committee composed of high 
level OSHA officials and charged it with "coordinating issues 
among the directorates and reviewing documents and issues 
resulting from the standards development process prior to the 
Assistant Secretary's review. "-^-^-^^ The Committee was 
supposed to recommend to the Assistant Secretary whether the 
agency should go forward with a rulemaking initiative. The 
Committee did not, however, always come to closure, and some 
ideas were effectively tabled indefinitely. 

If the Assistant Secretary decided to go forward with a 
rulemaking effort, the Regulation Review Committee was supposed 
to appoint a "Preliminary Team," composed of a technical person 
from the Health or Safety Directorate, an attorney from the 
Solicitor's Office, an analyst from the Policy Directorate, and 
other employees with particular expertise, to prepare a 
"Research and Analysis Plan" and "Part I of the Assistant 
Secretary's Summary . "^-^-^"^ The Research and Analysis Plan was 
meant to be "an outline of the facts to be documented and 
analyses to be made to justify a standard, "^-^-^^ and was to 
be "be based on available or easily attainable information and 
an outline of the factual bases and issues which need to be 
addressed . "^-^-^'' The Assistant Secretary's Summary was 
intended to provide the Assistant Secretary with a concise 
summary of the crucial information and issues being developed 
in the rulemaking process. Part I of the Summary set out the 
nature of the proposed action, the justification for that 
action, alternatives to the action, and groups with an interest 



(Continued from previous page) 
^-^^^ Secretary for Employment and Training Administration, and 
the Deputy Under Secretary for Intergovernmental Affairs. 
Improving Management Memo, supra note 454, at 1. 

(Continued from previous page) 

^-^-^^ Policies, October 23, 1981 [hereinafter cited as 
Departmental Procedures Memo] . 

^-^-^^ OSHA Instruction RUL . 1 , supra note 267, at III-2. 

^-^-^^ OSHA Instruction RUL . 1 supra note 267, at III-4, III-8. 

OSHA Instruction RUL . 1 , supra note 267, at V-7. 

OSHA Instruction RUL.l, supra note 267, at V-7. 



2 7 0, 



2 7 



OSHA RULEMAKING 179 



in it.-^-^-^^ The Rulemaking Directive allowed 5 to 10 staff 
days for this ef f ort ,^-^-^'' but it usually took approximately 
two months. ^-^-^^ 

If the Assistant Secretary decided to pursue the 
rulemaking effort further, the Regulation Review Committee 
would assemble a new "Regulation Team" to complete the agency's 
standard-setting process. Team leaders could come from any of 
the Offices within the Health or Safety Directorates .^-^^^ 
Although the team leader was responsible for the rule, he or 
she did not have direct authority over any of the individual 
team members .-^-^-^^ It was not unusual for one of the members 
of a team to outrank the team leader in the bureaucratic 
hierarchy .-^-^-^^ Thus, while the team leader gave assignments 
to various team members, he or she had no authority to ensure 
that the assignments were completed on time. 

The team's first task was to prepare a "Workplan" and Part 
II of the Assistant Secretary's Summary. The Workplan 
described the resources that would be required to complete the 
rulemaking project and provided a schedule of activities. It 
was subject to amendment as resource requirements and deadlines 
changed. The Workplan in theory committed the Regulation Team 
to a definite schedule with which upper level management could 
measure progress against time and resource commitments. 

After the Regulation Review Committee and the Assistant 
Secretary approved the Workplan and Part II of the Assistant 
Secretary's Summary, the Team was required, to undertake a risk 



2 7 2 



2 7 4 



2 7 5/ 



2 7 7 



The Preliminary team was also assigned the job of 
preparing the Concept Analysis Paper for Departmental 
review. 



Telephone interview with Robert Beliles, Office of Risk 
Assessment, Directorate of Health Standards Programs, 
OSHA (July 23, 1984) . 

The remainder of the Regulation Team was composed of 
representatives from the Solicitor of Labor, the Policy 
Directorate, the Office of Regulatory Analysis in the 
Policy Directorate, the Technical Directorate, the 
Training Directorate, and the Information Office. OSHA 
Instruction RUL . 1 , supra note 267, at V-6. 

Telephone interview with Arthur Gas, Office of Risk 
Reduction Technology, Directorate of Health Standards 
Programs, OSHA (July 23, 1984). 

Gas Interview, supra note 276. 



180 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



analysis and an alternatives analysis. The Team summarized 
these analyses and recommended a course of action in an Action 
Recommendation for the Regulation Review Committee and the 
Assistant Secretary. If necessary, a revised Workplan was also 
submitted and approved.-^-^-^^ The Action Recommendation was 
intended to be the primary decision document within the 
agency ,^-^-^'' Following approval of the Action Recommendation, 
the Regulation Team proceeded in accordance with the (possibly 
amended) Workplan to draft the Notice of Proposed Rulemaking 
under the direction of the relevant Standards Director. The 
team leader would assign to a member or members of the Team the 
task of incorporating all of the information that the Team had 
considered into a Preamble for the Notice of Proposed 
Rulemaking. How the task of drafting the Notice of Proposed 
Rulemaking was assigned varied from team to team. Sometimes 
the team leader would draft the notice, and sometimes the task 
would be divided among members with particular expertise .^-^-^"^ 
During the same time period that the Regulation Team was 
deliberating over the contents of the proposed rule, the 
representative from the Office of Regulatory Analysis in the 
Policy Directorate would draft the preliminary regulatory 
analysis documents .-^-^-^^ 

Finally, the Team had to draft a second Options Memorandum 
to accompany the rulemaking package through Departmental 
Review.-^-^-^'^ Since the Policy Review Board had by now already 
had one opportunity to examine the rulemaking effort and since 
the agency's effort was virtually complete, only minor changes 
to the rulemaking documents were usually necessary at this 



2 8 



to the Assistant Secretary for Regulatory Affairs, OSHA 
(July 23, 1984). The team also drew upon the Risk 
Analysis and the Alternatives Analysis in preparing an 
Options Memorandum for Departmental review. Since the 
contents of the Options Memorandum was almost identical 
to the contents of the Action Recommendation, this task 
was not especially burdensome. Although it no longer 
prepares an Action Recommendation, OSHA staff must still 
prepare an Options Memorandum for Departmental review. 
So the same analytical work is performed, but it need not 
fit the precise contours of the Action Recommendation. 

Beliles Interview, supra note 274. 

Beliles Interview, supra note 274. 

OSHA Instruction RUL . 1 , supra note 267, at III-15. 



OSHA RULEMAKING 18 



point. The Notice of Proposed Rulemaking Package and these 
related documents were then reviewed by the Regulation Review 
Committee, the Assistant Secretary, the Policy Review Board and 
sent to 0MB for further review.-^-^-^^ 

2. The Current System. 

The above-described 1982 internal procedures for OSHA 
rulemaking are best described as "byzantine." In the opinions 
of several OSHA employees, it must have reflected a strong 
desire on the part of upper level management to slow down the 
agency's already ponderous internal rulemaking process. Its 
excessive documentation requirements and its repetitive review 
procedures provided almost insuperable barriers to the 
production of rules, and in fact only one rule of any 
consequence was produced during the 3-4 years that those 
procedures were in place .-^-^-^^ The internal procedural rules 
also represented a more subtle effort to take authority from 
the Health and Safety Directors and shift it to the Assistant 
Secretary's Of f ice.-^-^-^^ They also gave the Assistant 
Secretary's Office greater power to control the direction of a 
rulemaking effort through the ability to appoint team 
leaders. ^-5-^^ 

In any event, the intricate rules were after a time 
observed mostly in their breach. In practice, these formal 
preliminary procedures were largely ignored .^-^-^^ The 
Regulation Review Committee was often bypassed as the Assistant 
Secretary directly ordered the Directorates to begin rulemaking 



^^^^' OSHA Instruction RUL . 1 , supra note 267, at III-15. 

^-^-^^ The only major rule to be promulgated during the period 
was the Hazard Identification Standard, 48 Fed. Reg. 
53280 (1983). 



2 8 5 



2 8 7/ 



Stein Interview, supra note 123; Silk Interview, supra 
note 224; B. White Interview, supra note 59. 

Stein Interview, supra note 123. 

The procedures were never observed for safety standards, 
which proceeded sequentially from the Safety Directorate 
(which drafted the bulk of the standard) to the Policy 
Office, to the Solicitor's Office and back to the Safety 
Directorate. Gordon Interview, supra note 321; B. White 
Interview, supra note 59. 

Frodyma Interview, supra note 66. 



182 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Assistant Secretary's Summaries and the Concept Analysis Papers 
were either ignored or treated in a very cursory fashion, and 
in many cases no Preliminary Team was ever appointed. High 
level input was secured through informal meetings with the 
Assistant Secretary for which the members of the team prepared 
memoranda and charts to lay out the issues and options, and the 
Assistant Secretary often decided the important issues on the 
spot . 

By late 1985, the procedures were as a practical matter 
irrelevant to the real world rulemaking process. Not only had 
they effectively stymied rules aimed at enhancing workplace 
safety, they had also sidetracked efforts aimed at repealing or 
amending existing rules to make them less burdensome. In 
addition, OSHA was by 1985 receiving a great deal of 
congressional pressure to begin promulgating rules, and it had 
received several court orders to complete internal decision 
making by specified dates. With rulemaking projects 
increasingly subject to court-ordered deadlines, the agency was 
forced to abandon the 1982 procedures or face the threat of 
being held in contempt of court. ^-^-^^ One of Assistant 
Secretary Rowland's last official acts was to abolish the 
intricate internal procedures described above .-^-^-^'' However, 
the Departmental procedures, establishing the Policy Review 
Board and requiring the preparation of a Concept Analysis Paper 
and Options Memoranda still remain in effect. 

The 1982 procedures have not been replaced with any 
particular management regime .^-^-^^ Although the "team" 
concept was abolished and although responsibility for 
rulemaking was returned to the Health and Safety Standards 
Directorates, the project officers who are responsible for 
particular rulemaking efforts often establish de facto teams 
made up of representatives from the Policy Office, the 
Solicitor's Office and other persons from the Health and Safety 
Standards Directorates with expertise in the subject 
area.^-^^^ While many of the subsidiary documentation 



-^-^^^ Sevin Interview, supra note 133. 

^-^-^^ Silk Interview, supra note 224; F. White Interview, supra 
note 59; Martonik Interview, supra note 59. Memorandum 
entitled "Management Responsibility for Standards," dated 
July 24, 1985; OSHA Instruction RUL . 1, supra note 267, 
Chapter 2. 

-^-^-*-'' F. White Interview, supra note 59. 

^-^^^ Sevin Interview, supra note 133; Stein Interview, supra 
note 123; Silk Interview, supra note 224; Harwood 

(Continued on next page) 



OSHA RULEMAKING 183 



requirements, such as the Research and Analysis Plan, the 
Assistant Secretary's Summary and the Action Recommendation, 
have disappeared as formal documents, a good deal of 
communication still occurs on a less formal basis between the 
Assistant Secretary's Office and the staff person with 
responsibility for the initiative through the Health and Safety 
Directors. An Options Memorandum is still prepared for the 
Assistant Secretary and for review by the Departmental Policy 
Review Board. ^-^^^ Deadlines still get established 
informally, but they are less often reduced to writing in 
formal documentation such as the Work Plan. Project officers 
in the Health Standards Directorate usually prepare Work Plans, 
which contain proposed deadlines, and these are updated 
regularly (usually in a monthly basis) .^-^^^ Still, these 
internally set deadlines usually slip without serious 
penal ty.-^-^-^^ The time interval between when OSHA receives a 
rulemaking petition or otherwise decides to examine a possible 
rulemaking topic and the time that it writes the Options 
Memorandum depends almost entirely upon the amount of outside 
pressure the agency receives ,^-^^^ even though there is no 
apparent reason why a deadline for preparing a Notice of 
Proposed Rulemaking could not be established at the time that 
the Assistant Secretary decides to go forward with a rulemaking 
project.^^-^'' 

Despite the elimination of the burdensome 1982 paperwork 
requirements, the agency's internal production has speeded up 
only slightly. While it is very clear that the 1982 procedures 
failed utterly to achieve expeditious rulemaking, OSHA still 



(Continued from previous page) 

■^-^-^^ Interview, supra note 138; F. White Interview, supra note 
59; B. White Interview, supra note 59; Martonik 
Interview, supra note 59; Gordon Interview, supra note 
129. 

-^-^-^^ Stein Interview, supra note 123; Harwood Interview, supra 
note 138; Martonik Interview, supra note 59. 

-^-^^^ Martonik Interview, supra note 59. In addition, the 
office of the Director of the Health Standards 
Directorate keeps a running account of who is responsible 
for which projects. Martonik Interview, supra note 59. 



2 9 s 



2 9 6/ 



2 9 7 



Martonik Interview, supra note 59; Sevin Interview, supra 
note 133; Harwood Interview, supra note 138. 

See also text accompanying notes 130-135, supra. 

Gordon Interview, supra note 129. 



184 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



needs a management and accountability system to ensure that 
upper level management's priorities are communicated to lower 
level staff, to ensure that bottlenecks do not develop, and to 
ensure that responsible agency officials are held accountable 
for inexcusable delays. Whether or not OSHA ever seizes 
control of its own agenda, it must invent an internal 
management system that makes the trains run on schedule. 

To accomplish this result, OSHA management must seriously 
address at least six severe management problems that currently 
plague OSHA's internal rulemaking management process: (1) the 
absence of effective mechanism for establishing and monitoring 
deadlines for achieving internal milestones; (2) inadequate 
incentives to meet established deadlines; (3) the absence of a 
mechanism for facilitating policy interchange between upper 
level management and lower level staff; (4) the lack of 
coordination among essential institutional actors; (5) the 
inability or unwillingness of upper level management to make 
difficult substantive decisions in a timely fashion; and (6) 
inadequate resources. 

B. Establishing and Monitoring Deadlines. 

1. The Current Absence of Deadlines 

As previously discussed, OSHA's statute does not provide 
firm deadlines for rulemaking actions. Thus, internally 
generated rules need not proceed in accordance with any legally 
required timetable. Likewise, matters brought to OSHA's 
attention through NIOSH criteria documents. Congressional and 
White House pressure, and updated private standards need not 
proceed in accordance with any legally enforceable deadlines. 
OSHA must respond to TSCA referrals within a deadline 
established by EPA, but there may be no judicial relief 
available for missed deadlines. In any event, the agency is 
only required to decide whether or not it will undertake a 
rulemaking; it does not have to set out or adhere to a 
timetable for completing the action. External petitions are 
subject to the Administrative Procedure Act's requirement that 
the agency respond to rulemaking petitions within a "reasonable 
time . "-^-^-^^ but judicial enforcement of this flexible 
standard is expensive and time consuming. Judicial relief is 
generally available under the Administrative Procedure Act for 



2 9 8 



Section 555(b) of the Administrative Procedure Act 
requires that agencies conclude matters presented to them 
"within a reasonable time," and Section 706(1) provides 
that a reviewing court shall "compel agency action 
unlawfully withheld or unreasonably delayed." 5 U.S.C. 
§§555(b), 706(1). 



OSHA RULEMAKING 185 



agency actions "unreasonably delayed," but judicial 
intervention into an ongoing administrative activity that lacks 
a statutory deadline is easily fended off, absent egregious 
circumstances .^-^-^'' Only in very rare instances have the 
courts ordered regulatory agencies to complete rulemaking 
activities by judicially established deadlines when the 
agency's own statute lacks a deadline. Interestingly, a large 
number of these cases involve OSHA rulemaking. 

At present, OSHA has in place only the most rudimentary 
system for setting deadlines for its regulatory 
activities .^-^-^' The Work Plan that some project officers 
prepare at the outset of a project-^-^-^^ and the Options 
Memorandum that is prepared for Departmental review contain a 
proposed timetable, but these deadlines are never formally 
affirmed and they are rarely enforced. Upper level management 
meets twice a year to prepare the agency's proposed regulatory 
agenda for submission to Departmental officials and 0MB. This 
document establishes proposed deadlines for actions on the 
agenda, but those deadlines are not regarded seriously by most 
agency employees, and they are in any event only very rarely 
met in pract ice .-^-^^"^ Some are established to meet political 
needs and are therefore often very unrealistic. Others are 
proposed solely out of the necessity for putting a date on the 
chart without any serious thought about whether they are 
realistic or about whether the agency truly intends to spend 
current resources in an effort to attain them. 

The deadlines taken most seriously by agency staff are 
those set in informal status meetings with the Assistant 
Secretary or Deputy Assistant Secretaries and the Directors of 
Health and Safety Standards and Policy Directorates .-^-^^^ 



^-^-^^ See, e.g.. United Steelworkers of America, AFL-CIO v. 
Rubber Manufacturers Ass'n, 783 F.2d 1117 (D.C. Cir. 
1986) (declining to disturb agency's proposed schedule 
for completing rulemaking). See also Telecommunications 
Research and Action Center v. FCC, 750 F.2d 70 (D.C. Cir, 

(Continued on next page) 

^-^-^^ Sevin Interview, supra note 133; Harwood Interview, supra 
note 138. 

^-^-'-^ Silk Interview, supra note 224; Stein Interview, supra 
note 123; Harwood Interview, supra note 138. 

^-^^^ Most of the lower level employees interviewed for this 
report put very little stock in the Regulatory Agenda 
deadlines . 

^-^-^^ Braslow Interview, supra note 123. 



186 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



These meetings, however, occur as various milestones, such as 
the preparation of the Options Memorandum, are met, and not at 
specific pre-arranged time intervals. They are therefore not 
effective as "action-forcing" devices. Time projections are 
typically arrived at on a 

"when-do-you-think-you-can-get-this-done" basis and they are 
not always reduced to writing. In addition, they are 
continually subject to informal adjustment without explanation 
as priorities change due to outside pressures or other resource 
needs. ^-^-^^ These informal deadlines and amendments to the 
deadlines are communicated informally by the Office Directors 
to the staff members who are assigned to particular rules and 
who in turn communicate them to other staff members. Apart 
from the unobserved deadlines published in the Regulatory 
Agenda, the agency generally avoids publicizing its internally 
generated deadlines. 

When the Policy Office or Health Standards Directorate 
contracts for outside work, as is usually the case for 
important projects, deadlines are imposed on agency 
contractors. But the realistic time requirements of the 
contractors are not always factored into the agency's rule 
generating process .^-^-^^ Sometimes contractors are given 
indefinite extensions for jobs related to projects that wind up 
on the back burner, and indeed the delayed contractor's report 
can be cited an excuse for delaying agency action. At the 
other extreme, contractors are pushed to produce fairly low 
quality output within unrealist ical ly short deadlines when 
outside pressures force the agency to act expeditiously .^-^-^^ 
A more deliberate attempt to set and adhere to deadlines could 
improve the quality of the jobs that contractors perform for 
the agency. 

The problem of the lack of deadlines is especially acute 
after the agency has held a hearing on a proposal and is 
formulating its final rule in response to the public 
comments .^-^-^'^ After a hearing date has been set (perhaps as 



(Continued from previous page) 
-^-^-^^ 1984) (establishing a "rule of reason" for determining 
^-^-^^ (Continued on next page) 

^-^-^^ Sevin Interview, supra note 133; Harwood Interview, supra 
note 138. 

^-^-^^ Gordon Interview, supra note 129. 

^-^-^^ Gordon Interview, supra note 129. 

^-^-^"^ Gordon Interview, supra note 129; Stein Interview, supra 
note 123; Harwood Interview, supra note 138. 



OSH A RULEMAKING 187 



a result of a court order), the agency staff does have a 
deadline, and the prospect of a public hearing generates a good 
deal of excitement and activity as the staff prepares witnesses 
and works on its cross-examination. As the hearing draws near, 
agency staffers work overtime preparing the best case possible 
for the agency's position. But after the hearing is finished, 
there is a period of time during which the agency awaits 
post-hearing comments. Staff members working on the rule turn 
to other matters, like answering backed-up correspondence and 
initiating new rulemaking projects. After the hiatus, there is 
a general reluctance to return to the nitty gritty work of 
reading hundreds or thousands of comments and preparing agency 
responses to those comments for publication in the preamble to 
the final rule. In the absence of a firm deadline for 
finishing this task, it tends to drag on as staff members who 
excitedly worked on the rule prior to the hearing allow the 
project to slip in their priorities. 

Without deadlines, it is always possible for lethargic 
staffers or professionals busy on other projects to put things 
off to another day. Moreover, because most of the 
science/policy questions that must be resolved in OSHA 
rulemaking are inherently unresolvable on technical grounds, it 
is always possible for someone on the technical staff to 
suggest that the project wait until more information can be 
developed. There is always one more criticism that bears 
answering .^-^-^'^ Similarly, it is possible for upper level 
management in the absence of stated deadlines to allow 
controversial issues to slide until further information can be 
developed and, perhaps more importantly, until political 
passions cool. 

OSHA does not have any systematic approach toward tracking 
the progress of its rulemaking initiatives .-^-^-^^ The project 
officer from the Health or Safety Standards Directorate is 
responsible for keeping the action on schedule, and the 
Director maintains close enough contact with the staff to know 
which actions are on track and which actions are slipping. The 
Office of the Assistant Secretary does not currently have a 
formal way of ascertaining on a periodic basis the status of 
OSHA's rulemaking. Although the agency no longer focuses its 



3 8/ 



3 9 



(Continued from previous page) 

the time required to make agency decisions); Schwartz, 
supra note 135, at 45. 

Sevin Interview, supra note 133; Stein Interview, supra 
note 123; Harwood Interview, supra note 138. 

F. White Interview, supra note 59. See also Delays in 
Setting Standards, supra note 49, at 23-24. 



188 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



short term attention primarily on one or two big rules as it 
did in the late 1970s, it does not have a tracking system to 
keep up with the progress of rules. As one official explained: 
"We keep it in our heads . "^-*-^'' 

Sometimes rules that are kept in the heads of agency 
officials get lost. On one occasion a project was literally 
lost in the Department for several months .^-^-^'' Indeed, 
rulemaking projects are sometimes initiated but never brought 
to conclusion without any formal upper level decision to 
abandon the ef f ort ,^-*-^^ and the project returns to the 
agency's agenda only in response to a new pet it ion. ^-^-^^ 
While informal tracking devices may be appropriate for an 
institution with a limited number of responsibilities that are 
of limited societal importance, it is entirely inappropriate 
for a modern federal agency of OSHA's status. 

The consequences of OSHA's failure to develop a 
deadline-setting and action-tracking system are painfully 
evident. As the agency misses its internally generated 
deadlines, external pressure grows. At the extreme, an 
affected group files a bureaucracy-forcing lawsuit and attempts 
to persuade a court to order deadlines. OSHA has become so 
accustomed to these suits that it now routinely responds to 
them by filing a proposed agenda for completing the action, 
rather than defending its failure to proceed 

expeditiously .^-^-^^ Some cynical OSHA staffers are convinced 
that the only way that the institution will move forward with a 
rulemaking initiative in the current context is pursuant to 
court-ordered deadlines where there is a credible threat that 
failure to meet a deadline will result in imprisonment. This 
lesson is not lost on beneficiary groups, and they are 
increasingly resorting to judicial remedies for OSHA's 
inaction. The net result is that, to a disturbing degree, OSHA 
has lost control over its resources. 



3 11/ 



Washington Post, May 12, 1983, A21 col. 2 (relating how 
the grain elevator standard became "mired in a 
bureaucratic netherworld between offices" so that no one 
in the agency could physically locate the rule). 

Sevin Interview, supra note 133. 

Stein Interview, supra note 123 (citing wood dust as an 
example); Sevin Interview, supra note 133 (citing cadmium 
as an example) . 

Sampson Interview, supra note 134. 



OSHA RULEMAKING 1 89 



If OSHA is to regain control over its own limited 
rulemaking resources, it must establish a system for 
establishing and monitoring progress toward the attainment of 
realistic deadlines for its rulemaking ini t iatives .^-^-^^ It 
is critical that these deadlines be attainable and not 
pie-in-the-sky projections. Rulemaking in OSHA is very 
complex, and it requires agency staff to assimilate file 
drawers full of highly technical inf ormat ion .^-*-^^ The 
deadlines must be established in full recognition of this fact. 
Yet once realistic deadlines are established, they should not 
be easily avoided. 

Since rulemaking initiatives are invariably prolonged 
affairs, the system should be capable of setting and tracking 
major deadlines for such events as the Assistant 
Administrator's approval of rulemaking projects, the decision 
whether to continue with the rulemaking effort after the staff 
has reacted to responses to any Advance Notice of Proposed 
Rulemaking, referral of initial decisions to 0MB, 0MB ' s 
response to OSHA ' s initial decisions, publication of the Notice 
of Proposed Rulemaking, the beginning and completion of the 
hearings, and the Notice of Final Rulemaking. It should also 
be capable of establishing and tracking interim deadlines for 
less visible milestones such as the time that all involved 
offices must assign a staff member to the project, preparation 
of the required departmental documents, preparation of the 
first draft of the NPRM, responses from various offices 
(including the Office of the Solicitor) on the first draft, 
completion of the second draft and responses, and completion of 
review by the Assistant Secretary's Office and the Policy 
Review Board. 

2. EPA's Action Tracking System. 

The Environmental Protection Agency has established an 
"Action Tracking System" (ATS) that could serve as a useful 
model for a similar system of establishing and tracking 
deadlines in OSHA. The ATS is a computerized accountability 
system that tracks more than 200 items, approximately 
two-thirds of which are rulemaking actions, as they progress 



^-^-^^ This is not the first time that OSHA has been urged to 
establish a system for establishing and monitoring 
progress toward deadlines. See Delays in Setting 
Standards, supra note 49, at 25. 



3 16/ 



Harwood Interview, supra note 138; Jacoby Interview, 
supra note 195. 



190 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



toward complet ion.^-*-^'' It is managed by the Planning and 
Accountability Branch of the Office of Standards and 
Regulations, which is under the Assistant Administrator for 
Policy, Planning and Eva luat ion .-^-^-^^ Its purpose is "to 
provide information on the status of the Agency's important 
activities in such a way as to ensure that . . . work is 
flowing smoothly and being completed in a timely way."^-^-^'' 
The system was meant to "highlight delays caused by staff 
offices — and even the 12th floor [the Administrator's 
office] ."A^/ 

A program office in the agency begins the rulemaking 
process by preparing a "start action request." This request is 
forwarded to the Office of Standards and Regulations under the 
Assistant Administrator for Policy, Planning and Evaluation. 
This Office has responsibility for moving an action through the 
agency's complicated rulemaking management system. When the 
start action request is approved, the activity is placed in the 
Action Tracking System. 

The Planning and Accountability Branch has, in conjunction 
with the program offices in the agency, established 13 
standardized "major milestones" for most rulemaking, based on 
the agency's past experience with similar rules. ^^-*-^ Unless 
the program office convincingly demonstrates why a particular 
rule is unique in its time requirements, the Planning and 
Accountability Branch will place its standardized time 
intervals into the system for major milestones. The program 
officers are strongly encouraged to place additional subsidiary 
milestones into the system as well. Subsidiary milestones can 
alert management when initiatives are falling behind schedule 
at an early time, and they can make it much easier to point the 
finger at the responsible person when a major milestone is 
missed. But unless the Deputy Administrator of the agency 



3 17 



Telephone Interview with Dan Fiorino, Director, 
Regulations and Information Management Division, Office 
of Standards and Regulations, OPPE, EPA (November 3, 
1986) . 

Telephone Interview with Robert Curry, Branch Chief, 
Planning and Accountability Branch, Office of Standards 
and Regulations, EPA (November 20, 1986). 

Memorandum from Alvin L. Aim to Addressees on Action 
Tracking System, Sept. 20, 1983 at 1 [hereinafter cited 
as Aim Action Tracking Memo] . 

Id. 

Aim Action Tracking Memo, supra note 319, at 2. 



OSH A RULEMAKING 191 



requires subsidiary milestones, they are at the discretion of 
the program office. 

Although computerized status reports are available to 
anyone with access to the agency's computer, the computer on a 
biweekly basis pulls out all of the projects for which there 
are milestones within the next two weeks and all the projects 
that are behind schedule. This "do-or-late" list is made 
available to upper level management and mid-level management on 
a biweekly basis. More importantly, it forms the basis for a 
report by the Office of Planning and Accountability to the 
Deputy Administrator for his biweekly meetings with all of the 
Deputy Assistant Administrators (middle management ) .^-^-^^ The 
Deputy Administrator carefully peruses the biweekly memorandum, 
which also contains suggested questions to ask specific middle 
management officials concerning any failures of their offices 
to meet their deadlines. Whether or not the Deputy 
Administrator inquires about a particular project on the late 
list, the Deputy Assistant Administrator (DAA) responsible for 
that project must be prepared to explain the missed deadline at 
the biweekly meeting. Since all relevant Deputy Assistant 
Administrators are present or represented at these biweekly 
meetings, they also give one DAA the opportunity to point the 
finger at another DAA if an office under the second DAA is 
holding up the rule. The second DAA must also be prepared to 
explain the problem. The biweekly meeting, then, is a place 
where middle level and top management can discover bottlenecks 
and work to eliminate them. 

If an office has a good reason for moving a milestone 
forward in time, it may request the Office of Planning and 
Accountability to amend the schedule accordingly. This has the 
effect of postponing the time that the next step of the project 
"pops up" on the due-or-late list. The requesting office must, 
however, explain the requested slippage and that explanation 
itself is entered into the Action Tracking System. The 
original schedule and all amended schedules, together with the 
slippage explanations, are retained in the system and may be 
called out of the computer at any time. The entire history of 
the project is thus available for inspection. 

The analysts in the Office of Planning and Accountability 
are reluctant to allow amendments to the schedules, and they 
demand a good reason (usually external to the responsible 
office) before they will do so. Reasons that suggest internal 
management or coordination problems are generally insufficient, 
because those are precisely the situations that should be 
brought to the attention of the Deputy Administrator and the 
other DAAs in the biweekly meetings. If the program office 
insists upon amending the schedule, the matter can be elevated 



^-^-^^ Aim Action Tracking Memo, supra note 319, at 2. 



192 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



to the Deputy Administrator. Since the Director of the Office 
of Planning and Accountability acquires over time a good sense 
for what the Deputy Administrator regards as an acceptable 
excuse, however, the Director usually prevails. 

During the past year, EPA has initiated an "open season" 
in September of each year during which program offices are 
required to identify additional policy guidance and regulatory 
activities for addition to the Action Tracking System and to 
update existing schedules to reflect realistic time frames for 
attaining remaining mi lest ones .-^^-^'^ Any revisions to 
existing schedules made during "open season" must be explained. 
The purpose of the "open season" is to allow each program 
office to begin the new fiscal year with a clean slate. This 
is intended to facilitate yearly performance evaluations and 
budget reviews. 

3. Advantages and Disadvantages of an Action Tracking 
System. 

There is little doubt that the Action Tracking System in 
EPA has greatly enhanced accountability for rulemaking. Low- 
and mid-level rule managers in all of the program offices 
report that the Action Tracking System makes them very aware of 
deadlines and of the possibility that they will be missed. It 
is at the very least embarrassing for a Deputy Assistant 
Administrator to have to explain to the Deputy Administrator 
why a rule from his or her office is no longer on track. Even 
when the office has a legitimate excuse for delaying a 
rulemaking effort, it must still go to the trouble of 
convincing the Office of Planning and Accountability that delay 
is necessary, and this at least brings the matter to the 
attention of the appropriate DAA. In general, the Action 
Tracking System has made the agency much more deadline 
conscious .-i-^-^^ 



3 2 3 



Memorandum from A. James Barnes to Addressees on Action 
Tracking System "Open Season," dated August 21, 1986. 

The fact that EPA's record in meeting its own statutory 
and internal deadlines is far from exemplary might 
suggest that OSHA's implementation of a similar Action 
Tracking System will not appreciably improve OSHA's 
rulemaking management process. The most persuasive 
answer to this objection is that EPA's system has been in 
place far less than two years. Prior to implementing the 
Action Tracking System, EPA's rulemaking management 
process was very similar to OSHA's informal process, and 
the agency's performance reflected that. Although the 

(Continued on next page) 



OSHA RULEMAKING 193 



A similar Action Tracking System in OSHA could go a long 
way toward improving the rule generating process at that 
agency, if it were effectively implemented. Rules could no 
longer disappear into the bowels of the agency, never to be 
seen again. All approved rulemaking initiatives would be in 
the tracking system. The fact that the Assistant Secretary (or 
perhaps a Deputy Assistant Secretary) would be apprised on a 
continuing basis of deadline slippages should serve as some 
inducement to the lower level staff, even if it does not 
provide quite the same spur to action as the threat of going to 
jail for contempt of court. 

A second great advantage of the Action Tracking System is 
its potential for uncovering bottlenecks. One EPA manager 
pointed out that when the system picked up delays in several 
regional implementation programs, further examination revealed 
that every one of the delays was attributable to the failure of 
one office in Headquarters to promulgate necessary guidance 
documents .-^-^-^^ The agency had been wasting large amounts of 
money and losing time because of a single bottleneck that was 
quickly uncovered by the system. 

A third advantage of an Action Tracking System is its 
capacity to identify programs that need more resources. A 
primary reason for OSHA's delays is the fact that most of the 
professionals in the Health Standards Directorate are 
constantly juggling several rulemaking actions at any given 
time.^^-^^ When there are no deadlines, any individual staff 
member can always put off one project to work on another, and 
it is difficult for a staffer to tell his or her boss that he 
or she is too busy if there is no time limit for any given job. 
Thus, the absence of deadlines and a tracking system can give 
the false impression that OSHA is capable of doing more than it 



3 2 S 



(Continued from previous page) 

Action Tracking System has not been in place long enough 
to yield quantifiable results, EPA's upper- and 
mid-management strongly believe that it has improved the 
rulemaking management process. EPA's ability to stay 
reasonably well on track in promulgating implementing 
regulations for the 1984 amendments to the Resource 
Conservation and Recovery Act, 42 U.S.C. § 6901, et seq., 
indicate that the process may be working in fact as well 
as in theory. 



Telephone Interview with Cynthia Puskar, Office of 
Management Systems and Evaluation, OPPE, EPA (November 
18, 1986). 

^-^-^^ Harwood Interview, supra note 138; Stein Interview, supra 
note 123. 



194 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



really can with its limited resources. Rather than disappoint 
a beneficiary group by declining to take on its preferred 
project, OSHA can simply agree to undertake it without saying 
when it will get done. In the long run, however, this tactic 
leads to the agency's disappointing many beneficiary groups 
when very little ultimately gets accomplished. And the focus 
at that point is inappropriately on the presumed lethargy of 
OSHA bureaucrats rather than on OSHA ' s lack of adequate 
resources . 

Reasonable deadlines and an action tracking system can 
reveal resource conflicts at a very early stage as one project 
officer explains that the reason that he or she missed a 
deadline was because he or she was working on another high 
priority project. Upper level decisionmakers can quickly 
become aware of the fact that the agency has filled its plate 
too full, and it can attempt to limit the number of new 
initiatives that it undertakes. In addition, the Action 
Tracking System can reveal individual branches within the 
agency that need more resources. If a single office is 
consistently behind the standardized deadlines, the problem may 
be that the program is lethargic, but it may be that the 
program needs more resources. Rather than firing the 
responsible official, the solution may be a quick infusion of 
resources into the troubled program.^-^-^^ 

The Action Tracking System is not, however, without its 
disadvantages. Perhaps the most significant disadvantage is 
that its heavy emphasis on meeting production deadlines may 
sacrifice quality. In the agency vernacular, the "bean 
counting" approach may result in rules that are not well 
considered and that are not well supported by facts and 
analysis. If the agency places too much emphasis on quantity 
and not enough on quality, it may produce a plethora of rules 



the Solicitor's Office complains that the 
reason that it is very often a bottleneck is its lack of 
resources. Jacoby Interview, supra note 195; Gordon 
Interview, supra note 129; Henshel Interview, supra note 
123. Even if OSHA * s priorities were definitely set and 
clearly communicated to the Solicitor's Office, it would 
still be a bottleneck,- because it is incapable of 
reviewing as many rules as OSHA is capable of producing. 
OSHA officials respond that the Solicitor's Office could 
review more rules with the same staff if it were less 
concerned with nitpicking details. Whatever the merits 
of this debate, an Action Tracking System would force the 
disagreement to the attention of upper level 
decisionmakers who could either provide greater resources 
to the Solicitor's Office or tell it to be less thorough 
in its reviews of OSHA documents. 



OSHA RULEMAKING 195 



that are later remanded to the agency by the reviewing courts 
for reconsideration. 

A second disadvantage of the system is that it will 
require additional staff. Before OSHA could effectively 
implement a similar system, it would have to make the resource 
commitment to staff an office with the exclusive responsibility 
for managing the tracking system. For a small agency such as 
OSHA, the staff could be small, perhaps as small as one or two 
employees .^^-^-^^ The staff would have to interract closely 
with the high level manager (either the Assistant Secretary or 
one of his Deputies) who is positioned at the top of the 
system, so that it could become very familiar with the reasons 
for deadline slippage that were acceptable and those that were 
not. To avoid requiring the ultimate decisionmaker to 
determine the merits of deadline slippages on an individual 
basis, the staff would have to be delegated some de facto 
authority to reject proposed deadline extensions. If the 
deadlines could be extended without penalty, they would not 
really be binding. 

A third related disadvantage is that a well-run action 
tracking system is quite demanding of high level officials. 
Since the time of high level agency officials is always in 
short supply, this added responsibility to meet with mid-level 
management on a biweekly (or some similarly short interval) 
basis can be quite burdensome. Nevertheless, this high degree 
of upper level attention is absolutely critical to the 
successful operation of the system. A system that informs 
lower level officials of their failures is of little value, if 
there is no potential for embarrassment before a high agency 
authority. EPA's last two Administrators have found the Action 
Tracking System to be sufficiently useful to warrant biweekly 
meetings with the agency's second in command, and there are no 
indications of dissatisfaction with this use of high level 
management resources. 

A fourth disadvantage is that the information in the 
action tracking system can become public through discovery in a 
bureaucracy-forcing lawsuit, a separate suit under the Freedom 
of Information Act, Congressional investigation, or the 
omnipresent "leak." The agency can safely assume that its own 
evidence of its inability to keep rules running on schedule 
will be subject to public attention. This can be of serious 
tactical disadvantage to the agency in a bureaucracy forcing 
suit, and it can put the agency in an embarrassing position in 
its relationships with committees in Congress. It is always 
more comfortable for the agency to say: "We are doing the best 



By way of comparison, OSHA has a total of about 2300 
employees, while EPA employs more than 9000. 



196 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



that we can," without having to worry about the possibility 
that its action tracking system will undermine its statements. 

In the final analysis, however, the advantages of the 
action tracking system far outweigh its disadvantages. Quality 
need not be sacrificed for "bean counting," if the agency is 
conscious of the problem, plans its resource needs in advance, 
matches those needs to realistic projections of resource 
availability, and allows deadline slippage for genuine quality 
concerns. Because the system would rely heavily upon 
computers, its personnel demands would be slight, and the 
simplicity of the program suggests that the computer resource 
needs would not be large. Revealing slippage to the world may 
be embarrassing, but it also renders the agency accountable to 
the public. 

The largest hurdle in the way of implementing an effective 
action tracking system is the degree of upper level commitment 
required to make the system work. It necessarily demands a 
large degree of very high level management attention. Unless 
either the Assistant Secretary or one of his Deputy Assistant 
Secretaries is willing to devote at least one-half day every 
two weeks (and perhaps more time in some intense periods), the 
system will fail. Moreover, upper level management will have 
to demonstrate its commitment to an effective rulemaking 
management system by tying the agency's incentive structure to 
that system. 

RECOMMENDATION: OSHA should immediately establish an 
Action Tracking System, modeled on the system in effect at 
the Environmental Protection Agency, to document the 
progress of rulemaking initiatives. The system should 
contain deadlines for meeting standardized major 
milestones and additional intermediate minor milestones in 
the progress of a rule's development. The Assistant 
Secretary or one of the Deputy Assistant Secretaries 
should meet on a biweekly basis with the Directors and 
Deputy Directors of the OSHA Directorates, the Deputy 
Assistant Solicitors for OSHA Health and Safety Standards, 
and perhaps a representative from the Departmental Policy 
Office to discuss progress toward designated milestones 
and reasons for any missed deadlines. OSHA should appoint 
a staff of one or two employees, which might be lodged in 
the Policy Office to manage the Action Tracking System. 

C. Inadequate Incentives. 

A rule management system cannot be effective if there are 
not adequate incentives for staff to proceed ahead with 
rulemaking initiatives in a timely fashion. While some agency 
staffers feel a keen sense of embarrassment that rulemaking 
efforts take so long, many have grown quite cynical about the 



I 



I 



OSHA RULEMAKING 197 



desire of upper level management to use government regulation 
as a vehicle for improving health and safety in the workplace. 
There is a general sense among agency staff, many of whom are 
past the mid-point of their careers, that agency management 
does not reward production and does not penalize 
lethargy .-^-^-^^ Several agency employees noted the recent 
apparent inability of the agency to attract and retain young 
and energetic professionals to the agency's standard-setting 
activities. ^^-^^ 

From management's perspective, it is apparent that it has 
very few tools available for providing incentives. The agency 
has only a very limited budget available for cash awards and 
merit bonuses. Penalties for nonproduction are very difficult 
to administer. The ultimate threat of termination is laughably 
unrealistic. Civil service laws and due process requirements 
ensure that firing a protected professional is an arduous 
process that is only very rarely worth the considerable 
institutional energy that it absorbs. Even if the agency were 
to take this drastic step for a single nonproductive employee 
(perhaps to set an example for others), there is a real 
possibility that externally imposed hiring restrictions would 
preclude hiring a replacement. A lazy employee may be better 
than no employee at all. Even the more realistic threat of 
sending an employee to "Siberia" deprives the agency of his or 
her services. 

Although there are not easy solutions to the incentives 
problem, some things can be done on a practical level and much 
can be done on a symbolic level. Assistant Secretary 
Pendergrass' job resembles, to a somewhat lesser degree, the 
task that former Administrator William Ruckelshaus faced when 
he returned to EPA in 1983. Ruckelshaus returned to an agency 
stripped of resources, extremely low in staff morale and very 
low in productivity. He brought a very effective manager with 
him to be his Deputy Administrator, and he proceeded directly 



3 2 9 



3 3 



See also Railton Interview, supra note 188 (OSHA suffers 
from morale problems and needs leadership). 

While this observation is no doubt accurate, attributing 
the relative absence of young professionals on OSHA's 
standard-setting staff to inadequate incentives may be 
unfair. In the past six years of drastically declining 
budgets, OSHA has had few positions to fill. Hence, the 
lack of vitality may be more attributable to lack of 
resources than to lack of management incentives. 
Nevertheless, the inability of upper level management to 
secure new positions or even to stem the loss of existing 
positions has not gone unobserved by agency staffers as 
evidence of the poor incentives within the agency. 



198 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



to the largely symbolic task of bolstering staff morale and 
projecting a better public image of the agency. The effective 
management of Deputy Administrator Aim, who established the 
Action Tracking System described earlier, was crucial. He used 
the meager incentive tools available to him very effectively to 
reward expeditious work and to punish lack of productivity. 
But more importantly, Administrator Ruckelshaus, in both his 
internal and external statements, created a sense among agency 
staff that the job they were doing was important and that doing 
it well was a reward in-and-of-itself . 

Given the large salary differentials between the public 
and private sectors, a sense of mission may be the most 
significant tool that OSHA has to attract and retain energetic 
professional staff. Assistant Secretary Pendergrass might 
likewise reinvigorate OSHA's professional staff by sending 
internal and external messages that the agency's mission is 
important and that public service is not second class 
citizenship . 

While symbols are important, they will probably not be 
sufficient to reinvigorate an agency as heavy laden with 
cynicism as OSHA. Symbols are fragile--if they are not backed 
up with resources, they will appear hypocritical and quickly be 
ignored. The agency must develop other rewards for expeditious 
progress and penalties for missed deadlines. The Action 
Tracking System described earlier has built-in incentives. 
Avoiding embarrassment is usually a large incentive for 
professionals in bureaucracies. When effectively administered, 
the Action Tracking System will make high level management 
aware of missed deadlines and require responsible mid-level 
management officials to explain delays in a meeting before 
their peers. In EPA, the threat of such an embarrassing 
encounter has acted as a significant spur to get promised tasks 
performed on time. 

Upper- and mid-level management should also have financial 
incentives available to reward good work. To a large extent, 
financial rewards should depend upon the quality of 
professional work, rather than its speed. But they should also 
be tied to performance as measured by the Action Tracking 
System. Nonfinancial rewards, like the "silver medals" that 
the Administrator of EPA personally awards in a public ceremony 
to outstanding agency employees, could be awarded to personnel 
on projects that are highly successful in meeting deadlines. 
Finally, upper level management can make it clear to mid-level 
management and staff professionals that annual leave will be 
cancelled for persons working on projects that are not on 
track. 

RECOMMENDATION: Upper level management in OSHA should 
attempt to convey to OSHA professionals the message that 
OSHA's task is an important one that requires commitment 



OSHA RULEMAKING 199 



to the expeditious implementation of the agency's 
statutory mandate. OSHA management should reinforce such 
symbolic messages with real rewards for expeditious work 
and penalties for unwarranted delays. 

D. Coordination Among Institutional Actors. 

Developing a rule requires the input of several 
institutional entities within OSHA and within the Department of 
Labor. While the project officers in the Health and Safety 
Directorates do the bulk of the work of gathering background 
information, administering contracts for technical information, 
assembling the record, drafting the proposed and final rules 
and mining the outside comments for information and analysis, 
they must depend upon at least two other offices in every 
rulemaking effort. The Policy Office in OSHA is responsible 
for gathering information on the costs and economic and 
technological feasibility of complying with proposed rules. 
The Solicitor's Office, which is not part of OSHA, must review 
documents to be published in the federal register, draft 
certain parts of those documents, and prepare expert witnesses 
for testimony at the hearings .^-^-^'' 

Since the project officer has no direct control over 
either of these offices, he or she must either induce the 
representatives from these offices to do their jobs in an 
expeditious fashion or do their jobs for them. How the project 
officer proceeds is largely a matter of personal style. Most 
of the project officers interviewed for this Report simply did 
the jobs themselves if the representatives from the other 
offices did not perform their tasks in a timely f ashion .^-^-^^ 
At least one project officer sets firm deadlines and threatens 
to send the document forward without the needed work from other 
offices if it is lacking, seeking thereby to use the threat of 
embarrassment to induce the representatives from the other 



In addition, before OSHA rules may be cleared at the 
Departmental level, the Assistant Secretary for Policy 
must be satisfied that the rules conform with overall 
Departmental policies. Like the Solicitor's Office, OSHA 
has no control over this office. F. White Interview, 
supra note 59. 



note 224; Harwood Interview, supra note 138; Gordon 
Interview, supra note 129. 



Sevin Interview, supra note 133. 



200 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Clearly, neither of these solutions is adequate. Project 
officers are trained in health and safety matters; they are not 
competent to draft the economic and legal sections of documents 
to be published in the Federal Register. Although the threat 
of moving ahead without the work of the other offices may act 
as some inducement to action, it is ultimately a hollow one. 
As a practical matter, the agency cannot publish a document 
that lacks the relevant sections. Even the threat of 
embarrassment may not be real to an attorney in the Solicitor's 
Office, who does not report to any upper level OSHA 
official. ^^^^ 

Another alternative is for the project officer to elevate 
matters to mid-level management. The Director of the Health or 
Safety Directorate may informally bring delays to the attention 
of the Director of the Policy Directorate or the Assistant 
Solicitor for OSHA.-^^^^ But even at this level, there is no 
guarantee that the priorities of both offices are identical. 
In the past there have been problems of coordinating 
priorities .^-^-^'' The Policy Office, which has even fewer 
professionals than the Health and Safety Standards 
Directorates, must know the relative priorities of those 
Directorates so that it can adequately manage multi-year 
contracts and draft documents in the proper sequence .^-^-^^ In 
the past, poor communication of priorities between the two 
offices has resulted in significant bottlenecks in the Policy 
Office as completed technical analyses on health issues awaited 
the completion of analyses of the feasibility of control 
technologies .-^-^-^^ 

Similar coordination problems have afflicted the 
relationship between the Health and Safety Standards 



project officer's superiors to move a rulemaking 
initiative along expeditiously, a staff member from one 
of the other offices can use delay as a lever to extract 
substantive concessions on the content of rules. Thus, 
the absence of a mechanism for making individual offices 
accountable for delays can result in a changed 
substantive output. 

Stein Interview, supra note 123; Henshel Interview, supra 
note 127. 



^-^-^'' Braslow Interview, supra note 123. 



note 224. 



OSHA RULEMAKING 201 



Directorates and the Office of the Solici tor .^-^-^^ Like the 
Policy Office, the Solicitor's Office sometimes lacks 
sufficient resources to stay abreast of all of the rulemaking 
activities of the Health and Safety Di rectorates .^^-^^ 
According to one OSHA project officer, "any given project 
officer is fighting with other project officers for the time of 
the economists and lawyers . "-^-^^^^ If an item has a higher 
priority in OSHA than it does in the Solicitor's Office, the 
Solicitor's Office priority necessarily prevai Is .^-^-^'^ In 
addition, since middle management in the Solicitor's Office 
usually insists on reviewing the documents that the attorneys 
have produced or reviewed, documents tend to pile up on the 
desks of mid-level managers in the Solicitor's Of f ice .^-^-^•^ 
OSHA project officers and mid-level managers are frequently 
frustrated by these bottlenecks. 

Officials in the Solicitor's Office counter that they have 
an important quality control f unction. -^-^-^'' They must insist 
that preambles to proposed and final rules are written with 
sufficient clarity, analysis and record support that they can 
survive the inevitable judicial chal lenges .^-^^'' Too often, 
in the opinion of some in the Solicitor's Office, the project 
officers in OSHA believe that it does not matter what is in the 
document as long as it comes out on time.^-^-^^ In addition, 
the attorneys have a substantive role to play in ensuring that 
OSHA standards are enforceable, a consideration that OSHA 



Jacoby Interview, supra note 195; Henshel Interview, 

supra note 127. 

^-^-^^ Harwood Interview, supra note 138. 

^-^-^^ Silk Interview, supra note 224; Harwood Interview, supra 
note 138; B. White Interview, supra note 59; Martonik 
Interview, supra note 59. 

^^-^^ Silk Interview, supra note 224; B. White Interview, supra 
note 59; Officials in the Solicitor's Office do not deny 
this. Jacoby interview, supra note 195; Henshel 
Interview, supra note 127. 

^-^-^^ Jacoby Interview, supra note 195; Gordon Interview, supra 
note 129; Henshel Interview, supra note 127. 



3 4 5 



3 4 6 



Jacoby Interview, supra note 195. 
Jacoby Interview, supra note 195. 



202 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



They maintain that performing these 
quality control functions is time consuming and cannot be 
started until OSHA has produced a near-complete document .^-^-^^ 
Finally, the Solicitor's Office is plagued with a high turnover 
rate. Each time an attorney leaves, a new one must familiarize 
himself with the details of several projects .^-^^ 

The problem of delays and bottlenecks is largely a problem 
of coordination.^-^-^^ In principle, the Policy Office and the 
Solicitor's Office are willing to adhere to the priorities of 
the Health and Safety Standards Directorates .^-^-^^ Problems 
arise when those priorities and (perhaps more frequently) 
changes in such priorities are not communicated to the other 
offices. And to the extent that the Policy and Solicitor's 
Offices have different priorities and are unwilling to amend 
them to reflect the priorities of the Health and Safety 
Standards Directorates, high level intervention becomes 
necessary. 

The Directors of the Health and Safety Standards 
Directorates have traditionally attempted to coordinate 
informally with their counterparts in the other Offices, but 
this has not generally proved satisfactory. First, the need 
for coordination under such an ad hoc process all too often 
becomes apparent after problems have already arisen. Sometimes 
correcting the problem is not an easy matter; for example, the 
Health Standards Directorate may need today the results of a 
contractor's study that, under the terms of the contract, will 
not be ready for another six months .^-^-^^ Second, the ad hoc 



Jacoby Interview, supra note 195; Henshel Interview, 
supra note 127. 

Jacoby Interview, supra note 195; Henshel Interview, 
supra note 127. 

Henshel Interview, supra note 127. 

F. White Interview, supra note 59. 

Frodyma Interview, supra note 66; Jacoby Interview, supra 
note 195. The Solicitor's Office has a legitimate 
coordination problem, because its time is not necessarily 
its own. Litigation schedules are not always 
predictable, and an attorney who is critical to a 
rulemaking project may be called away for weeks writing a 

(Continued on next page) 

One observer related a case in which lack of 
communication resulted in a regulatory impact analysis 

(Continued on next page) 



OSHA RULEMAKING 203 



approach deals with only the worst problems--! .e . , those that 
are of sufficient magnitude that the project officer brings 
them to the attention of the Director .^-^-^^ Third, the 
informal approach will not resolve genuine differences in 
priorities when the two offices are in disagreement as to what 
the priorities should be. Finally, the informal approach will 
not prevent other offices from using delay to advance 
particular substantive agendas. For these reasons, a more 
formalized procedure is needed to force coordination among the 
relevant institutional actors and to obtain upper level 
resolution of differences on a regularized basis. 

The Action Tracking System described previously is an 
ideal vehicle for this purpose. With such a system in place, 
the Health or Safety Standards Directorate would enter a 
proposed schedule into the system at the time the project was 
approved by upper level management. The other relevant offices 
would have an opportunity to comment upon the proposed schedule 
before it became final. Any disputes over the proposed 
schedule could be resolved in one of the periodic meetings 
with the Assistant Secretary or Deputy Assistant Secretary and 
mid-level managers, thus avoiding future bottlenecks. As a 
deadline approached, the relevant offices would receive 
reminders from the system operators. If a deadline was missed, 
the responsible offices would be obliged to explain the 
slippage at one of the meetings. The location of the 
bottleneck or delaying activity would become immediately 
apparent, and additional resource needs could be identified. 
Conflicts in priorities would also be revealed to upper level 
management who would then be in a position to resolve such 
conflicts on-the-spot .^-^-^^ 



(Continued from previous page) 
^-^-^^ brief to support a previous standard. Henshel Interview, 
supra note 127. But this is not a major cause of missed 
deadlines in the Solicitor's Office. 

(Continued from previous page) 

^-^-^^ (based on contractor studies) that analyzed options that 
were not in the draft premable or the proposed rule. The 
process was delayed for almost a year while the 
contractor studied the options that were in the preamble 
and the regulatory impact analysis was revised to fit the 
preamble. Seminario Interview, supra note 131. 



3 5 3 



Henshel Interview, supra note 127 

(Continued on next page) 



^^^^ Conflicts between OSHA priorities and the priorities of 
the Solicitor's Office would be less easily resolved. 



204 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



In addition, the team concept can help avoid schedule 
conflicts at lower levels in the agency. At the most basic 
level of interaction between the essential institutional 
actors — the informal rulemaking teams that exist in practice, 
if not on paper--there is in fact a good deal of coordination. 
Many, though by no means all, project officers in the Health 
Standards Directorate expressed satisfaction with the ability 
and diligence of their counterparts from the Office of 
Regulatory Analysis and the Solicitor's Of f ice .^-^-^^ 

At the time the Assistant Secretary decided initially to 
pursue a rulemaking initiative, the Health & Safety 
Directorate, the Policy Directorate, and the Solicitor's Office 
could formally assign a representative to a team chaired by the 
Health and Safety Directorate. Representatives from other 
parts of the agency, such as field operations, could be 
assigned to teams on an ad hoc basis. The timing of input from 
the Policy and Solicitor's offices should not be a matter 
within the discretion of the project officer in the Health and 
Safety Directorate, as it commonly is at present. The Action 
Tracking System could, for example, have a standardized 
deadline for the first team meeting to ensure that all of the 
relevant offices assigned members to the team in a timely 
fashion and to ensure input from the other offices before the 
project officer has foreclosed possible regulatory options. 

The agency has, however, experienced problems with the 
team concept that may arise again if it is reinstituted . 
First, the team leader does not have line authority over other 
members of the team.-^-^-^^ This, however, is not so much a 
problem with the team approach itself as it is a problem of 
lack of accountability in the various offices that provide 
representatives to the teams. Adoption of an Action Tracking 
System should go a long way toward eliminating this problem. 
Even if a project officer does not have authority to enfoce 
deadlines, the Action Tracking System will make it clear to 
high level officials who is missing deadlines. 



3 S S 



(Continued from previous page) 

because the Solicitor's Office does not serve OSHA. But 

they would be made apparent at a very high level within 

OSHA, and could be resolved in meetings between the 

Deputy Assistant Secretary for OSHA and the Assistant 
Solicitor for OSHA. 

Silk Interview, supra note 224; Harwood Interview, supra 
note 138. 



^-^^^ Frodyma Interview, supra note 66; Silk Interview, supra 
note 224 . 



OSHA RULEMAKING 205 



A second problem with the team approach is the possibility 
of "renegade teams." According to some observers at OSHA, a 
primary reason for eliminating the team approach in 1985 was 
the fear that teams would form their own opinions on issues and 
inform the press when those opinions differed from those of 
agency policymakers .^^-^^ The "renegade team" problem is 
particularly a problem of middle management. If the Directors 
of the Directorates are incapable of preventing professional 
staff from advancing their own agendas through the press, the 
Directors are not doing an adequate job of managing. While 
this may be a problem during a time of weak management and very 
low agency morale, the fear that lower level staff will gang up 
on upper level decisionmakers is not a good reason to abandon a 
vital decisionmaking tool. 

When a team that works well together is established, there 
may be no good reason to break it up. To the contrary, there 
is every reason to keep a successful group together to work on 
other projects.^^-^'' Although OSHA has made no effort in the 
past to keep successful teams together, it should consider 
doing so in the future. Cooperation at the informal work group 
level can eliminate much friction at higher levels. 

RECOMMENDATION: OSHA should formally reinstate the team 
concept to perform the basic tasks of gathering or 
analyzing information, drafting documents, responding to 
comments and advising the Assistant Secretary. OSHA 
should attempt to coordinate rulemaking initiatives 
through the Action Tracking System previously recommended. 
OSHA should consider allowing successfully functioning 
teams to work on more than a single rulemaking initiative. 

E. Lack of Policy Interchange. 

OSHA lacks a procedure for communicating policy from upper 
level management to lower level professionals. Typically, once 
a rule is assigned to a project officer, he or she is allowed 
to develop the rule, with the help of other employees drawn 
from OSHA and the Solicitor's Office, without much upper level 
supervision until he or she has produced a draft of a notice of 
proposed rulemaking. While this maximizes the freedom of lower 
level staff to incorporate technical data and scientific and 
engineering judgments into the final rulemaking product, it 



Frodyma Interview, supra note 66; Seminario Interview, 
supra note 131; Silk Interview, supra note 224; F. White 
Interview, supra note 59; B. White Interview, supra note 
59; Braslow Interview, supra note 123. 

Gordon Interview, supra note 129. 



206 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



minimizes upper level policy input. Since policy plays a very 
large role in scientific rulemaking ,-^-^-^^ the product that 
ultimately emerges may not satisfy upper level management from 
a policy perspective. Similarly, purely technical 
considerations may cause lower level staff to eliminate 
alternatives that might be attractive from a policy 
perspective, thereby depriving upper level management of an 
opportunity to chose from among a full range of options. Too 
often, upper level management receives a memorandum that 
sandwiches the staff's preferred alternative between two red 
herrings, leaving the agency policymakers with no real choice. 

This hierarchical approach to developing a proposed rule 
has a vast potential for unnecessary delay. If the upper level 
managers are dissatisfied with the staff's output, they may 
either send the staff back to the drawing board, perhaps to 
return only after further information has been gathered and 
options developed over a period of months or years, or return 
the project to the staff for time-consuming patch and repair. 

When upper level policymakers return projects to agency 
staff, they rarely provide written documentation of the reasons 
for the action. ^-^-^^ Decisions may be made in meetings in 
which the pros and cons of various options are debated, but 
such meetings do not result in closure memoranda memorializing 
the issues discussed and the reasons that motivated 
policymakers. When a similar issue arises in the future at 
lower levels, one or more staffers or an Office Director might 
recall the previous meeting in which upper level decisionmakers 
took a position on the issue, but even when this sort of 
internal folklore is available to low level staffers it may be 
inaccurate or out of date. In the absence of written accounts 
of important decisionmaking meetings, agency staffers are 
obliged to decide many issues anew in individual proceedings. 
On some large issues, such as the policy preference for 
engineering controls over personal protective devices, the 
position is reasonably clear and consistent, but on other 
important issues, such as the weight to be afforded disease 
end-points other than cancer, low level staff are often at a 
loss.^^" 

Lack of policy communication can also produce "renegade 
teams" attempting to implement policy agendas that vary from 



3 6 



3 6 1 



See McGarity, Substantive and Procedural Discretion in 
Administrative Resolution of Science Policy Questions: 
Regulating Carcinogens in EPA and OSHA, 67 Geo. L.J. 72' 
(1979) . 

Sevin Interview, supra note 133. 

Sevin Interview, supra note 133. 



OSHA RULEMAKING 207 



those of upper level management. As previously noted, the 
"renegade team" problem was one of the reasons that the team 
concept for rulemaking was abandoned.^-^-^^ Eliminating the 
team approach, however, does not necessarily prevent staff 
members from attempting to implement their own policy agendas 
through the normal rule development process. Although most 
members of the professional staff agree that major policy 
decisions should not be made at the GS-13 level, they express 
frustration at the failure of upper level policymakers to 
communicate policy to lower level staff. 

OSHA could reduce this large potential for duplicative and 
time-consuming remands to the staff by establishing a process 
for elevating issues from the staff level to very high levels 
in the agency at periodic intervals and when otherwise needed 
to resolve intra-agency policy clashes. EPA has established a 
process that may serve as a model for OSHA. Under EPA's 
procedure, high level personnel in the program office may 
nominate important rules for a special "Options Review 
Process . "^-^-'^ The Deputy Administrator of the agency then 
designates 20-30 rules per year for this special review 
process . 

At crucial junctures in the evolution of a rule, an 
Options Review Meeting is held to choose which regulatory 
options the agency will actively pursue throughout the 
remainder of the rulemaking process. The participants in the 
Options Review Meetings are the Deputy Administrator and other 
very high level agency employees representing^ offices with an 
interest in the proceeding. The timing of the Options Review 
Meeting is flexible. It is intended to occur after the team 
has devoted some study to the relevant issues but before it has 
narrowed down the options to the two or three to which it will 
devote the bulk of its attention. The lead office prepares an 
analysis of several options, and the goal of the meeting is to 
narrow the range of opt ions .^-^-^^ 



3 6 3 



3 6 4/ 



Silk Interview, supra note 224; F. White Interview, supra 
note 59; B. White Interview, supra note 59; Frodyma, 
supra note 66. 

Nominations for review are based upon rule's anticipated 
cost, the likelihood that it will cause public 
controversy, its importance to the program, its 
precedential value, and the probability that the rule 
will require the agency to resolve a major policy issue 
that may have impacts on more than a single program. 

Memorandum on Options Selection/ Rejection Process from 
Alvin L. Aim, Deputy Administrator to Assistant 

(Continued on next page) 



208 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



The purpose of the Options Review process is five-fold. 
First, upper level decisionmakers view the Options Review 
process as "an institutional mechanism for forcing 
consideration of a much broader spectrum of approaches to the 
regulatory problem. "^-^-^^ Having forced lower level staff to 
identify a broad range of options, a second purpose of the 
process is to allow high level policymakers to narrow the range 
of options that the lower level staff considers and, as the 
rulemaking process progresses toward completion, to select the 
option that will go forward to 0MB and the Administrator as the 
agency's preferred opt ion. -^-^-^^ Third, the process was 
intended to give upper level management a greater role in the 
subtle policymaking that goes on at low levels in the 
bureaucracy as the staff attempts to reach consensus. Finally, 
it was intended to reduce the number of occasions in which 
upper level decision makers in reality had only the two 
opt ions--accept ing the staff recommendation or sending everyone 
back to "square one." 

Upper level managers in EPA have generally been very 
satisfied with the Options Review Process. There is a general 
perception at all levels in the agency that the process has 
been extremely useful in providing policy direction to lower 
level staff. While this is obviously attractive to very high 
level management, low level staff also like the potential that 
the process has for forcing high level resolution of difficult 
policy issues. The Options Review Process also provides an 
effective vehicle for resolving low level disputes. By giving 
the disputants a "day in court" before the highest level agency 
decisionmaker early in the process while many options are still 
alive, it interjects a "creative" adversarial note into the 
agency deliberations. The Deputy Administrator often decides 
issues in the presence of the staff, and not later after an 



365/ 



3 6 7 



(Continued from previous page) 

Administrators and General Counsel, November 4, 1983 
[hereinafter cited as Options Selection/Rejection Memo]. 

Interview with Rob Wolcott, Special Assistant to the 
Deputy Administrator, EPA, Washington, D.C. (June 27, 
1984). 

Memorandum on Criteria and Guidelines for Review of 
Agency Actions from Alvin L. Aim, Deputy Administrator to 
Assistant Administrators, General Counsel, Inspector 
General, Associate Administrators, Regional 

(Continued on next page) 

Wolcott Interview, supra note 364. 



OSHA RULEMAKING 209 



The chief disadvantage to the Options Review process is 
that it consumes a great deal of the time of very high level 
officials. High level policymakers must prepare extensively 
for options review meetings, which can go on for hours before 
coming to closure. Second, the process demands that very high 
level officials narrow options on the basis of a relatively 
brief debate. If the policymaker is not adequately prepared, 
this may produce snap judgments that the agency may later 
regret. Third, it requires upper level decisionmakers to make 
difficult decisions. Although doing nothing or gathering more 
data are usually available options, the fact that a decision is 
required means that the upper level decisionmakers cannot brush 
difficult rulemaking initiatives under the rug. Finally, 
closure memoranda for Options Review Meetings can result in 
differing interpretations of decisions reached in those 
meetings. On some occasions in EPA, each side to a debate has 
read the closure memorandum to seal a victory for its point of 
view.^^^ 

On balance, however, the options review mechanism can be 
of great utility to an agency that has difficulty making 
decisions and communicating policy to lower level staff. The 
process is highly regarded at all levels in EPA, and it has 
been retained by the new administration that replaced the 
Ruckelshaus administration in 1985. 

EPA's Options Review process is not the only alternative 
available for structuring upper level input into lower level 
decisionmaking at an early stage in the development of 
regulatory options. In a small agency like OSHA, it may be 
possible for upper level decisionmakers to participate directly 
in the lower level decisionmaking process on a routine basis. 
Early in OSHA's history, relatively high level decisionmakers 
participated actively in the development of individual rules. 
But, as we have seen, the tendency then was for the agency to 
concentrate all of its attention on one or two large rulemaking 
actions to the exclusion of other activities, such as priority 
setting. If OSHA is to have a regularized process for 
initiating rulemaking projects on a continuous basis, and if 
the agency leadership is to be available for other important 
tasks, it should probably not return to the more personalized 
process of the past. 

An intermediate approach would be for the Assistant 
Secretary to pick two or three important rules per year for his 



(Continued from previous page) 

Administrators, and Staff Office Directors, January 30, 
1984 [hereinafter cited as Criteria and Guidelines Memo], 
at 5. 

Wolcott Interview, supra note 364. 



210 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



special attention. A special high level work group could be 
appointed with the Assistant Secretary or one of his Deputies 
as the chair of the workgroup. Agency employees with 
particular expertise could be called in as needed to provide 
technical expertise. The Food Safety and Inspection Service in 
the Department of Agriculture has adopted this model for a few 
very important and controversial rules. ^-^-^^ 

The primary advantage of this approach is that it allows 
very high level decisionmakers to become deeply involved in the 
nitty gritty of a few rulemaking efforts. Those few rules that 
get an intense dose of high level policy input may serve as 
precedents for less important rules. The approach also allows 
upper level policymakers to see the rule-generating process in 
actual operation, and it may give them a more sympathetic 
understanding of the problems that lower level work groups 
face . 

This high level work group approach does, however, require 
a decisionmaker who is not afraid to steep himself in the 
details of highly complex decisions. Because it requires a 
rather intense effort by very high level agency decisionmakers, 
it must be reserved for very important rules. It is better 
adopted to an agency, like FSIS, that writes no more than a 
single major rule every year or two. Virtually every rule that 
OSHA promulgates has large impacts on worker health and the 
regulated industry, and there is no natural dividing line 
between rules that are deserving of special treatment and rules 
that can adequately be handled by the ordinary rule initiation 
process. Thus, the high level work group approach may not be 
easily adapted to OSHA. 

OSHA should attempt to implement an Options Review Process 
patterned after the EPA model, but applicable to all of its 
rules. Although OSHA is a small enough agency that policy 
coordination among upper level managers is generally not a 
difficult matter, the critical elements of the Options Review 
Process are its systematic nature and its penetration to the 
lowest levels of the agency. Policy need not be communicated 
on an ad hoc basis in a very general way; it is communicated in 
regulatory meetings about particular issues that arise in 
particular projects. Most importantly, precedents are set to 
guide other staffers working on other projects. Because the 
precedents are memorialized in closure memoranda that are 
available for all agency employees to read, the agency can 
avoid time-consuming future remands and the risk of renegade 
teams . 



See T. McGarity, Regulatory Analysis in Federal 
Regulatory Agencies, Report to the Administrative 
Conference of the U.S. (1985). 



OSH A RULEMAKING 2 1 1 



RECOMMENDATION: OSHA should implement an Options Review 
process for important health and safety rulemaking 
initiatives. At least once in the early development of 
such rules the staff should identify and analyze several 
options for consideration in an Options Review meeting 
chaired by the Assistant Secretary or one of the Deputy 
Assistant Secretaries. The goal of Options Review 
meetings should be to discuss and debate broad 
alternatives for approaching a rulemaking initiative and 
to narrow the range of options to be considered in the 
future. The meeting should be memorialized in a closure 
memorandum that would be made available to staff involved 
in other rulemaking initiatives. 

OSHA could conceivably fold an Options Review Process into 
the implementation of an Action Tracking System, should it 
choose to adopt that system. The key to a successful Action 
Tracking System is the periodic (biweekly in EPA) meetings of a 
high level official with mid-level management to report on the 
status of pending projects. Similarly, the key to the Options 
Review Process is the meetings of a high level official with 
upper and mid-level management to narrow options. In a small 
agency like OSHA, it may be possible to combine these two 
functions in to a single two-part "Status Review and Options 
Selection/Rejection" meeting of the Assistant Secretary or one 
of his Deputies with mid-level management. The first half of 
the meeting would be devoted to status reports on pending 
activities. The second half would be devoted to any options 
selection/rejection items on the agenda. Any of the Directors 
could place a matter requiring high level policy input on the 
agenda for the second half of the meeting by preparing and 
circulating an options memorandum in advance of the meeting. 
The memorandum would identify the issue, place it in the 
context of a particular project, explain its broader 
significance, if any, to other pending or future projects, set 
out several options for resolving the issue, and briefly 
identify the advantages and disadvantages of each option. In 
order to get on the agenda for a meeting, the Office would have 
to circulate the memorandum sufficiently far in advance that 
all relevant offices in the agency could prepare responses. 
Since OSHA must prepare an Options Memorandum for the 
Departmental Policy Review Board in any event, the time spent 
preparing options memoranda for agency Options Review meetings 
would not be wasted. Those memoranda would merely be 
precursors for the Departmental Options Memorandum. 

While any important issue in any project could be placed 
on the agenda for the section half of the meeting, the Action 
Tracking System would, in addition, schedule options review 
meetings at standardized critical junctures in the development 
of all rules. An options review session would automatically be 



212 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



scheduled at these critical junctures and the Directorate 
responsible for the rule's development would be required to 
prepare an options memorandum for circulation and response 
prior to the meeting or be prepared to explain at the first 
half of the meeting why no options review is necessary for the 
project during the second half of the meeting. 

While the options review process will not eliminate all of 
the problems of policy coordination in an agency that must 
address complex science/policy questions on a regular basis, it 
can bring about a significant improvement in OSHA's current ad 
hoc approach at very little expense. The chief ingredients are 
an effective Action Tracking System, conscientious mid-level 
managers, and an Assistant Secretary or Deputy Assistant 
Secretary who is willing to become immersed in important 
science/policy issues and make tough decisions in an 
expeditious fashion. The Action Tracking System adds an 
element of discipline to the otherwise loosely coordinated rule 
initiation process, and the Options Review approach interjects 
a crucial element of policy guidance at critical junctures. No 
systematic decisionmaking approach, however, will enhance 
OSHA's rule generation process if upper level decisionmakers 
are not willing to make hard decisions on the basis of very 
little information in an expeditious fashion, a subject to 
which now turn. 

F. Inability to Make Difficult Decisions. 

Virtually all health regulations and many safety 
regulations require extremely difficult decisions from upper 
level management in OSHA. Since delay is always in the 
interest of some interested party, OSHA decisionmakers often 
face strong pressures not to decide these difficult questions. 
When placing a "hot" political issue on the back burner is a 
viable option, upper level decisionmakers may elect that 
option, rather than stir up further controversy. 
Decisionmakers may also have technical reasons for not 
deciding, such as the desire to await the completion of one 
more study or survey that has the potential to reduce the very 
large uncertainties surrounding science/policy decisionmaking. 
Sometimes there is a legitimate need to do further work to 
avoid the possibility of reversal in the courts of appeals, but 
sometimes the desire for more information is a convenient 
excuse not to decide difficult questions. 

OSHA has shown an increasing tendency to rely routinely 
upon Advance Notices of Proposed Rulemaking (ANPRs) to solicit 
information from regulated industries and other interested 
parties. The ANPR can be an effective tool for acquiring 
information and ideas at an early stage in a rule's 



OSHA RULEMAKING 213 



development .^-^-^^ But there is a general feeling among agency 
staff and among outside practitioners that the ANPR rarely 
results in the production of useful information for OSHA.^-^-^^ 
Outside parties are simply unwilling to scour their files for 
information at this stage, and to the extent that information 
that is not readily available to OSHA is available to outside 
parties, they are unwilling to tip their hands at this early 
stage and face the risk of revealing or foreclosing later 
strategies .^-^^^ Most observers of the process believe that 
the ANPR at best serves the function of putting companies on 
notice that the agency is seriously considering promulgating a 
standard for them; it rarely induces them to share useful 
information with the agency. Yet agency contractors 
understandably want to delay their reports until they have had 
an opportunity to assimilate any information that an ANPR 
produces .^-^^^ Since it can delay the rulemaking schedule by 
six months to a year, the ANPR can be used to avoid hard 



See ACUS Recommendation No. 76-3, 1 C.F.R. § 305.76-3 
(1986) (suggesting that ANPRs are effective when: "(1) 
the scientific, technical or other data relevant to the 
proposed rule are complex; (2) the problem posed is so 
open-ended that an agency may profit from receiving 
diverse public views before publishing a proposed rule 
for final comment; and (3) the costs that errors in the 
rule may impose, including health, welfare and 
environmental losses imposed on the public and pecuniary 
expenses imposed on the affected industries and consumers 
of their products, are significant.") 

Harwood Interview, supra note 138; Gas Interview, supra 
note 159. 

Harwood Interview, supra note 138. 

Gordon Interview, supra note 129. 

Stein Interview, supra note 123; Gas Interview, supra 
note 159. Based on a Report prepared by Professor 
Luneberg, The Administrative Conference has recommended 
that "where appropriate and feasible," agencies should 
publish notice of the receipt of petitions for rulemaking 
and provide a period of time for public comment. 

Luneberg, supra note 132; ACUS Recommendation No. 86- , 

1 C.F.R. §305.86- (1986). We agree that it is 

generally a sound practice for an agency to inform the 
public of a rulemaking petition and to allow public 

(Continued on next page) 



214 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



RECOMMENDATION: OSHA should not routinely use the Advance 
Notice of Proposed Rulemaking (ANPR) as an information 
gathering technique. The ANPR should only be used when 
information that is not available through other vehicles 
is very likely to be forthcoming in response to the ANPR. 

Some agency staffers and most representatives of 
beneficiary groups believe that OSHA goes to extreme lengths to 
perfect the record to avoid reversal on appeal. ^-^^^ Pointing 
to 100-page preambles that discuss every minor contention 
raised in the comments, they believe that such 
"overpreparation" of the record and "overexplanation" is 
unnecessary to meet OSHA's "substantial evidence" standard of 
review. Most industry representatives forcefully dispute this 
idea, maintaining that OSHA should always have a sound 
technical basis for its rules. The attorneys in the 
Solicitor's Office are also convinced that elaborate analysis 
and documentation is necessary to survive judicial review, and 
they explain that much of the delay caused by their office is 
due to its concern for the quality of the agency's 
analysis .^-^-^^ In their opinion, it is worth spending a few 
extra months perfecting a Federal Register document if it will 
avoid an even more time consuming court remand. 

There is a generally shared belief among the lower level 
staff that past Assistant Secretaries, for whatever reasons, 
took too long to make policy decisions and communicate them to 
the staff. Many of the lower level staff related instances in 
which they had worked diligently on projects only to have them 
languish at high levels in the agency or the Department for 



3 7 S 



3 7 6 



(Continued from previous page) 

comment on that petition, but we do not read this 
recommendation to suggest that the agency use this 
process as a vehicle for gathering technical information. 
Should OSHA, in response to the ACUS recommendation, 
adopt a procedure for notifying the public of rulemaking 
petitions and soliciting public comment, we would urge 
the agency to put fairly strict deadlines on the response 
(e.g., 30 days), and we would urge the agency not to use 
the process as an excuse to delay in moving forward with 
the process of prioritizing the subject of the petition 
in its prioritization scheme. Our recommendation is that 
OSHA not routinely issue still another ANPR to gather 
information after it has decided to grant the petition. 

Harwood Interview, supra note 138; B. White Interview, 
supra note 59. 

Jacoby Interview, supra note 195. 



OSHA RULEMAKING 2 1 5 



weeks, months, or even years. Staff members were not given 
direct explanations for the delay, but usually assumed that the 
rules were being held up because of an inability or 
unwillingness on the part of upper level management to decide 
difficult questions. A related complaint is that upper level 
decisionmakers sometimes return controversial rules to the 
staff for further work on particular issues knowing full well 
that the additional work is not likely to be 
outcome-determinative . 

It is difficult to determine how much of this perceived 
problem is attributable to an unwillingness or inability of 
upper level management to decide hard questions and how much is 
due to the impatience of agency staff and beneficiary groups. 
Without doubt some rules, like the still-germinating safety 
standard for the oil and gas industry, have been put off 
indefinitely out of upper level management fears of stirring up 
political controversy. But just as clearly, upper level 
management, which is ultimately responsible for the agency's 
output, has every right to demand further analysis of critical 
issues, even when it is not obvious to the staff that further 
analysis will change the ultimate outcome. Part of the problem 
is probably the lapse of "management memory" that accompanies 
the rapid turnover rate in OSHA's upper level management .^-^^^ 
A legitimate query by a new Assistant Secretary who is 
unfamiliar with the history of an issue may be perceived by 
long-term agency staff as a deliberate attempt to slow down a 
rule's progress. 

There is no easy way to address these potential sources of 
delay. Clearly, management should attempt to alleviate staff 
concerns that their efforts will be placed on the back burner 
for political reasons. One of the reasons that the 1982 
procedural reforms failed was the failure of upper level 
decisionmakers to respond rapidly when Regulation Teams 
elevated issues to the Regulation Review Committee. Rather 
than wait for upper level decisionmakers to resolve such 
issues, the teams resolved them without upper level input, 
thereby contributing to the "renegade team" problem. ^-^-^^ 
There is, however, a growing impression among lower level staff 
that the current Assistant Secretary is willing to make hard 
decisions within relatively brief time-frames. 

To some extent the problem may be alleviated by better 
communication between staff and upper level officials. The 
staff must be sensitive to the realities of the political world 
in which upper level decisionmakers must deal. If lower level 
staff professionals were allowed to attend the Options Review 



-^-^-J-'^ See text accompanying note 21, supra. 
-^-^-^^ See text accompanying note 361, supra. 



216 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



meetings proposed in this Report ,^-^-^^ there might be better 
communication about which projects warrant the most low level 
attention. In addition, the staff might gain a better 
understanding of the reasons that upper level managers have for 
delaying an initiative or reworking aspects of a preamble. The 
options review meeting would provide an opportunity for 
long-time lower level staff to communicate to new management 
the history of an issue, perhaps avoiding a time consuming 
"reinvention of the wheel." Of course, if lower level 
professional staff are to be privy to high level options review 
meetings where sensitive political considerations are debated, 
then they cannot feel free to leak the contents of such 
discussions to the media. 

Even in the absence of an Options Review process, upper 
level management should make greater efforts to keep lower 
level staff informed of the reasons for their actions, if only 
to give them guidance for next time. But beyond that, keeping 
staff informed of the reasons for management decisions makes 
the staff feel like they are part of a unified whole, rather 
than a neglected appendage. Greater upper level management 
attention to symbolic messages to lower level staff and the 
rest of the world, as suggested previously, may also help 
remedy this problem. If the staff and beneficiary groups 
believe that the Assistant Secretary and his top aides are 
genuinely trying to advance the agency's mission, they will 
more easily understand how outside considerations can force 
upper level management to lay back momentarily. 

G. Inadequate Resources. 

If OSHA is serious about increasing its ponderous 
rule-generating pace, it must demand a substantial infusion of 
resources. The Health Standards Directorate is seriously 
understaffed. Individual health professionals in that 
Directorate are responsible for multiple projects. While they 
are managing the rule-generation process for projects assigned 
to them, they must also answer petitions for new rulemaking 
initiatives, draft responses to TSCA referrals, meet with other 
agencies, and meet with other professionals from the private 
sector. The current professionals are, to put it bluntly, 
overworked. In addition, OSHA badly needs an infusion of fresh 
blood. ^-^-^"^ The creation of new positions in the Health 
Standards Directorate would allow the agency to hire new 
staffers . 



See text accompanying notes 362-366, supra. 



OSHA RULEMAKING 217 



RECOMMENDATION: OSHA should seek additional resources for 
the Health Standards Directorate. It should attempt to 
fill any new slots for occupational health specialists 
with highly motivated young professionals. 

The recommendation that the agency seek additional 
resources in a time of severe monetary constraints on 
regulatory programs may well fall on deaf ears, but that makes 
the need no less critical. It is hypocritical for Congress and 
0MB to criticize OSHA for poor work if they are unwilling to 
provide sufficient resources for the agency to do a good job. 

Whether or not OSHA gets new resources for expanding the 
size of the Health Standards Directorate, it can make some 
management improvements that should result in more efficient 
use of existing resources and that should make the real 
consequences of the agency's current resource squeeze clear. 
Adopting the recommendations suggested here cannot give the 
agency more resources, and in fact some of the recommendations 
require additional resources or a reprogramming of existing 
resources. Yet some changes are absolutely necessary if OSHA 
is to adequately discharge its obligation to provide safe and 
healthful workplaces for employees. 



219 



ADMINISTRATIVE CONFERENCE OF 
THE UNITED STATES 

Report for 
RECOMMENDATION 87-2 



FEDERAL PROTECTION OF PRIVATE SECTOR 
HEALTH AND SAFETY WHISTLEBLOWERS 



by 

Eugene R. Fidell 

Partner 

Klores, Feldesman & Tucker 

2001 L Street, N. W., Suite 300 

Washington, D. C. 20036 



March 1987 



220 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Table of Contents 

Introduction and Summary 

Taxonomy and Terminology 

The Common Law Context 

The Federal Legislative Response 

1. Public Sector 

2. Private Sector Employees 

3. "Twilight Zone" Cases 

4. Caseload 

Shortcomings of the Current Arrangements 

1. Jurisdictional Lacunae 

2. Protected Conduct 

3. Limitations of Actions 

4. Investigative Arrangements 

5. Adjudicatory Procedures 

6. Remedies 

7. Judicial Review 

8. Interaction with Program Agencies 

9. Access to Law and Interagency Doctrinal Growth 

Relation to Prior Conference Recommendations 

Conclusions and Recommendations 

Tables: 

1. Private Sector Employee Protection Statutes 
(Health and Safety) 

2. Public Sector Employee Protection Statutes 
(Health and Safety) 

3. Protected Conduct 

4. Protected Conduct: Protected Disclosure 

5. Exhaustion of Employer Remedies 

6. Remedies 

7. Caseload, FY85 

8. Whistleblower Case Chart 

9. Citations to Statutes and Regulations 
10. Abbreviations 



WHISTLEBLOWERS 221 



Introduction and Summaryl/ 

Few areas of federal labor law are currently the subject 
of as wide public interest as "whistleblowing" , a now familiar 
term for the dissemination by an employee of information critical 
of or reflecting adversely on an employer, typically for the 
purpose of correcting or preventing some violation of law or other 
harm to the public interest. V The most widely publicized recent 
episode — involving two engineers employed by Morton Thiokol Inc., 
a major National Aeronautics and Space Administration contractor 
for the ill-fated Challenger space shuttle — is only one in a 
growing series of incidents in which employees have alleged that 
they were retaliated against for whistleblowing in matters 
affecting health or safety. 

Over a dozen federal laws attempt to protect whistle- 
blowers from retaliation in wide areas of private sector activity 
where health and safety are at stake. 2/ These laws, which protect 
both public and workplace health and safety interests, omit large 
and potentially important industries such as aviation and 
pharmaceuticals. In addition, they have created a crazy quilt of 
investigative, adjudicatory and review responsibilities. These 
are summarized in Table 1 below. There appears to be increasing 
Congressional interest in protecting yet other categories of 
whistleblowing. 4^/ 

While a body of literature has developed concerning 
whistleblowing (and the promise of more to come) , it is only now 
being recognized that these statutes form part of a larger whole. 
Until now, with a few notable exceptions, V little effort has been 
made to render a rational account of Congress' activity in this 
area and those who have become involved under one or another of 
the statutes have tended not to become involved in the others. 
Federal whistleblowing protection has probably been seen more as 
an appendage to the underlying substantive regulatory program, 
than as a focus for legal analysis in its own right or as a new 
subspecialty within the field of labor law. One of the purposes 
of this report is to suggest a different perspective: viz . , that 
the varieties of legislative and administrative experience under 
the federal health and safety whistleblower protection provisions, 
taken as a whole, represent a "sea change" in labor law that 
merits study and legislative attention in its own right. 

As Table 1 shows, under eight of the federal whistle- 
blowing statutes, the Secretary of Labor has assigned 
investigative responsibility to the Wage and Hour Division, under 
two others to the Occupational Safety and Health Administration, 
and under one to the Mine Safety and Health Administration. 
Other agencies have important investigative or adjudicatory 
responsibilities as well. These include the Department of the 



222 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Interior, which has both investigative and adjudicatory tasks, the 
Department of Defense (as to DoD contractors), and the independent 
Mine Safety and Health Review Commission, whose job is only 
adjudicatory. With the exception of the relationship between the 
Wage and Hour Division and the Nuclear Regulatory Commission, 
there appears to be little active coordination among the agencies 
concerned . 

Some of the statutes create elaborate hearing proce- 
dures; others are silent. They differ widely on matters as 
critical as the definition of protected conduct, the statute of 
limitations, remedies, and the machinery for adjudication and 
judicial review. Anomalies abound. For example, statutes of 
limitations range from 30 days to 6 months. Where whistleblowing 
in respect of violations of OSHA's own regulations are concerned, 
OSHA investigates, and adjudication is in the district courts. 
Where violations of the Surface Transportation Assistance Act of 
1982 are in issue, on the other hand, OSHA investigates, but 
adjudication is by Department of Labor administrative law judges. 
The Mine Safety and Health Review Commission, an independent 
agency, decides whistleblowing cases; the Occupational Safety and 
Health Review Commission — another independent agency — does 
not. Some of the statutes cover safety-based refusals-to-work 
along with the kinds of disclosure most people think of as 
whistleblowing; some contemplate the award of punitive damages; 
some authorize temporary reinstatement while the merits of the 
case are being adjudicated. 6^/ Employees who lose at the agency 
level under most of the statutes may obtain judicial review; not 
so, however, in the case of violations of section 11(c) of the 
Occupational Safety and Health Act or section 211 of the Asbestos 
Hazard Emergency Response Act because the employees are completely 
dependent upon the willingness of the Labor Department to 
prosecute their causes on their behalf. 

Because many of these discrepancies reflect vagaries of 
the legislative process as it has addressed various industries on 
an incremental or piecemeal basis over the years, a number of them 
are difficult to justify according to any neutral principle of 
public administration. On some issues, conscious substantive 
legislative choice and the political process are reflected in the 
current institutional arrangements for the protection of private 
sector health and safety .whistleblowers. For this reason, as 
noted in the concluding section of this report, some of the 
matters that one might see every reason to alter may lie beyond 
the ordinary role of the Administrative Conference. On the other 
hand, the institutional hodge-podge described in this report 
transcends mere untidiness or asymmetry. At a certain point, 
divergent approaches can overwhelm the law by eroding public 
confidence in the fundamental coherence of the governmental 
process. That point has unquestionably been reached in Congress' 



WHISTLEBLOWERS 223 



efforts to protect those who suffer employee retaliation for 
calling attention to health and safety violations. 

This report suggests that the Conference recommend (1) 
the enactment of omnibus whistleblower legislation uniformly 
applicable to all activities subject to health and safety 
regulation by the federal government in order to encourage private 
actions in support of those federal programs and to ensure 
fairness, uniformity and rationality in the adjudicatory and 
remedial processes, and (2) specific actions (identified below) to 
be taken by the Secretary of Labor to improve the administration 
of the current diversity of private sector whistleblower 
protection programs. 2/ 

Taxonomy and Terminology 

Although much of the business of ensuring that the laws 
are observed have become the responsibility of government rather 
than private citizens, the Supreme Court has rejected the notion 
that private citizens have no role to play. 8^/ By way of preface, 
it may be appropriate to try to orient the whistleblower 
protection provisions within the range of tools available to 
government for the achievement of public objectives. Some of 
these tools are negative, and some are positive. Some are direct 
( i.e. , used by the government itself) and some are indirect 
(relying rather on private individuals). For example, 
imprisonment, fines, penalties and forfeitures are familiar 
sanctions government uses to achieve its ends. These are direct 
and negative (or disincentives ) .9^/ RewardslO/ or qui tam 
provisions might be thought of as indirect positive incentives in 
that they rely on or seek to encourage private interests to help 
achieve public ends. In some circumstances, the law may create an 
indirect negative incentive to encourage private citizens to 
assist in suppressing crime, as in the case of the Tariff Act 
provision making it a misdemeanor to refuse to assist a Customs 
officer. 11/ The whistleblowing anti-retaliation provisions of 
federal law are best thought of as the removal of a disincentive 
for private assistance in achieving public ends, since the purpose 
of such provisions is to hold harmless those employees whose 
information must reach the government in order to help achieve 
public goals. 12/ 

In addition to this taxonomic note, mention might be 
made of certain terminological pitfalls in the whistleblowing 
area. Thus, the phrase "employee protection" is occasionally used 
to describe whistleblowing anti-retaliation measures . 13/ This 
term, however, is also used in other contexts that have nothing to 
do with whistleblowing, such as the arrangements under section 
507(e) of the Federal Water Pollution Control Act for 
investigations into employees' complaints that an employer has 



224 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



discharged or discriminated against them because of effluent 
limitations or orders issued by EPA under that statute , 14/ or the 
seniority-protective provisions of the Airline Deregulation Act of 
1978 . 15/ One recent enactment uses the term "Public Protection," 
which is so vague as to be essentially meaningless . 16/ 

The terms "discrimination" and "affirmative action" are 
used in describing protected whistleblowing and the fashioning of 
remedies, respectively. These obviously have special meanings in 
our society, and their use in this context can be a hindrance to 
understanding because it inappropriately implies a legal or 
doctrinal kinship with the race relations area, thereby bringing 
into play a very different set of concerns and values from those 
that underlie public policy in the whistleblowing area. 

The Common Law Context 

The background against which the federal legislation 
addressed in this study arose may be briefly sketched. 17/ At 
common law (American, incidentally, rather than English), the rule 
evolved that an employee who did not have a contract that provided 
otherwise could be dismissed at the will of the employer. This 
doctrine is said to have its origins in a treatise published a 
little more than a century ago, 18/ and promptly took root in the 
cases, which seem to have adopted this notion quite uncriti- 
cally. _19^/ Eventually, however, some courts began to carve 
exceptions from the rule, and doctrines have arisen in a number of 
jurisdictions holding that there was a "public policy exception" 
to the "employment-at-will" rule. In summary, such 
exceptions hold that an employer will not be permitted to 
discharge an employee for conduct that advances a recognized 
public policy. The law on this point is essentially state 
law, 20/ and the extent to which the doctrine applies to any 
particular set of facts is likely to vary dramatically from one 
jurisdiction to the next. 

The Federal Legislative Response 

In addition to judicial recognition of a "public policy 
exception" to the at-will doctrine. Congress and a number of state 
legislatures have enacted specific provisions ensuring protection 
against retaliation for employees who assert various rights. The 
federal legislation includes a variety of statutes, only some of 
which deal with public health and safety programs. 21/ This report 
is confined to the measures protecting health and safety 
whistleblowers; a broader study may also be desirable at a later 
date to explore the need for rationalizing the total federal 
legislative scheme. 



WHISTLEBLOWERS 225 



1. Public Sector Employees . Table 2 lists the various 
federal statutes that seek to protect from retaliation those 
public employees who engage in whistleblowing.22/ These statutes 
are beyond the scope of this study, but a few words may still be 
in order. The key statute is the Civil Service Reform Act of 
1978, which created broad protection for disclosures by civilian 
federal employees. Disclosures relating specifically to health 
and safety form only a small part of the field of protected 
conduct, and it is believed that few of the whistleblowing cases 
that have arisen under the CSRA have involved health or safety 
considerations. Most CSRA cases have to do with allegations of 
waste, fraud and abuse. 

The most recent addition to the list of public sector 
antiretaliation laws is the Department of Defense Authorization 
Act, 1987, which extends protection to defense contractor 
employees for disclosures to Members of Congress, DoD and the 
Justice Department "relating to a substantial violation of law 
related to a defense contract . " 23/ This measure is a modification 
of an earlier proposal that would have extended expressly to 
disclosures relating to "substantial and specific danger to public 
health and safety." In addition, the earlier version protected 
military personnel as well as contractor employees from 
reprisals . 

2. Private Sector Employees . The range of federal 
statutes protecting private sector employees who "blow the 
whistle" on health and safety problems is considerable. These are 
set forth in Table 1. Together, they cover a large part of the 
American work force, and fall into several broad categories. Some 
are industry-based, such as those affecting mining, the nuclear 
industry or particular transportation modalities. Some address 
sweeping environmental concerns, such as those for which EPA is 
the program agency. And some cut across the broad spectrum of 
industrial activity in the country, such as OSHA, NLRA or 
LMRA. 24/ The same conduct may violate more than one statute, thus 
involving multiple decisional tracks . 25/ 

The effectiveness of these arrangements is open to 
question. As two perceptive students of the field recently wrote, 
"[t]he record is. particularly grim in industry; not one of the 
industrial whistleblowers we studied survived on the job. " 26/ 
"With few exceptions, they are driven out of not just their jobs, 
but their professions, too. "27/ 

3. "Twilight Zone" Cases . In a number of instances, it 
may be difficult to characterize the class protected by a whistle- 
blower statute as "public" or "private." For example, the 1984 
Defense Department authorization extended whistleblower protec- 
tion, including health and safety disclosures, to employees of 



226 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



nonappropriated fund activities. Section 211(a) of the Asbestos 
Hazard Emergency Response Act of 1986 protects all persons from 
discrimination, but specifically includes employees of state and 
local educational agencies. State employees have found protection 
under the Safe Drinking Water Act , 28/ and at least one case 
involving a federal employee — that of EPA employee Hugh Kaufman 
— has been filed with the Department of Labor under the 
Comprehensive Environmental Response, Compensation and Liability 
Act of 1980. Government contractor employees have been held to be 
protected under several of the whistleblower statutes . 29/ 

4. Caseload . Basic caseload figures for private sector 
health and safety whistieblowing cases in Fiscal Year 1985 appear 
in Table 7. The data show that by far the largest single category 
of complaints is under section 11(c) of the OSH Act. These cases, 
however, do not involve agency hearings; if OSHA finds the case 
meritorious, it brings a civil action on behalf of the complaining 
employee. The only intra-agency remedy a complainant has is to 
seek review within OSHA of an initial decision not to pursue the 
case . 30/ As the table shows, very few section 11(c) cases are 
pursued by the Department . 31/ 

The section 11(c) complaint caseload appears to have 
been fairly stable over the last several years. 32/ For example, 
in FY78, OSHA received 3,000 employee complaints. 33/ The 
corresponding numbers for FY83 and FY84 were 2522 and 2813, 
respectively. 34/ 

The next-largest group of cases involves the Surface 
Transportation Assistance Act, under which OSHA received 354 
complaints during FY84 . 35/ The number of complaints declined to 
248 in FY85.36/ "[I]n the first half of 1984, only eight cases 
were found to have merit. By the end of the year, twenty-five 
merit findings had been issued, and in 1985 fifty-eight merit 
findings were issued. "37/ In FY85, the OALJ docketed 20 STAA 
cases following OSHA investigation, and conducted 6 APA hearings. 

Third in frequency are retaliation complaints under the 
Federal Mine and Safety Health Act. MSHA investigated 276 
complaints of safety- or health-related discrimination that were 
filed during FY85.38/ 

The Department of Labor has created an Office of 
Administrative Law Judges to adjudicate cases under a broad range 
of statutory programs, most of which have nothing to do with 
whistieblowing. That office is, however, also responsible 
for a substantial part of the overall whistleblower caseload. 
Taken together, the OALJ received 77 such cases during FY85 under 
the various whistieblowing statutes it administers (including the 
20 STAA cases referred to above). Of these, the vast majority 



WHISTLEBLOWERS 227 



were nuclear cases brought under the Energy Reorganization Act, 
Overall, the OALJ has received 264 whistleblowing cases since 
1980 .39/ The number of whistleblower complaints received by the 
Department of Labor is not available at this writing, but it 
appears that in FY35, the Wage and Hour Division conducted 
approximately 50 investigations under the statutes for which it is 
responsible, of which about half were found to be meritorious. 

Statistics concerning the incidence of whistleblowing 
cases brought before the NLRB are also unavailable, although case 
summaries furnished by the Board's Office of General Counsel 
indicate that health and safety issues are not uncommon in Labor 
Board proceedings .40/ 

There have been very few discrimination complaints under 
the Surface Mining Control and Reclamation Act. 

For comparative purposes, during FY85, the Office of 
Special Counsel of the r4erit Systems Protection Board received 135 
whistleblowing disclosures from federal employees . 41/ 

Shortcomings of the Current Arrangements 

1. Jurisdictional Lacunae - The most obvious shortcoming 
of the current federal legislation protecting health and safety 
whistleblowers is the omission of major sectors of the economy 
where health and safety are unquestionably at stake. For example. 
Congress has yet to extend whistleblowing protection to: aviation, 
aerospace, vessel construction and operation, food and drugs, 
medical devices, and consumer products generally. While the major 
environmental laws administered by EPA include whistleblower 
provisions, one -- the Noise Control Act of 1972 — does not. 
Even where the industry itself is covered, the statute may be 
written to exclude persons whose jobs have safety 
implications . 42/ 

A major omission has long been the vast number of 
government contractors to the extent that their activities were 
not covered by any of the subject-matter-specific antiretaliation 
statutes. For example, in 1974, the Department of Labor and the 
Atomic Energy Commission acknowledged that "... Section 4(b) (1) 
(of the OSH Act) renders OSHA inapplicable to the working 
conditions of AEC contractor employees working in Government-owned 
or -leased, contractor/operated facilities as long as AEC 
continues to prescribe and enforce radiological and 
non-radiological occupational safety and health standards." This 
kind of gap has been addressed in a variety of ways, including 
internal agency regulations or contractual provisions . 43/ 



228 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Congress has also begun to recognize the need for 
coverage of government contractors in general. For example, in 
the aftermath of the Challenger disaster, Representative Markey 
observed: 

If the Morton Thiokol engineers were Federal employees, 
they would have recourse through the Civil Service 
Reform Act and the Office of Special Counsel. But as 
employees of a Government contractor, they have no 
protection. 44/ 

How whistleblowers such as the Morton Thiokol engineers 
ought to be protected may well raise difficult drafting problems, 
since it appears that their expressions of concern were not 
couched in terms of violations of federal regulations, but rather 
involved a degradation of safety standards peculiar to the shuttle 
effort. Whether safety concerns voiced within a company ought to 
be protected is a matter of considerable controversy, and Congress 
would do well, in framing generic whistleblower protective 
legislation, to consider carefully how such legislation would have 
affected the Challenger case. 

Congress has not yet passed general whistleblower 
protection for employees of government contractors, although it 
has done so for Department of Defense contractors in the 
Department of Defense Authorization Act, 1987 . 45/ Prior to 
passage of that legislation, a Defense Department contractor 
employee alleging retaliatory discharge could try to sue under the 
False Claims Act , 46/ although the gravamen of such a case is fraud 
on the government rather than harm to the employee. Generic 
protection for contractor employees was introduced in the 99th 
Congress47/ and will be reintroduced in some form in the 100th. 

Of course, not all health and safety programs involve 
concerns of the same gravity and magnitude. To take an obvious 
example, the potential health and safety implications of many 
violations of NRC regulations could be of a different order of 
magnitude from an isolated violation of trucking safety 
regulations. Comparing safety programs requires a consideration 
not only of the magnitude of the hazard, but also the probability 
of its occurrence. Perhaps a standard could be developed under 
which one could argue that different measures of employee 
protection are appropriate " in different industrial or other 
contexts. On the other hand, one would think that anything that 
was sufficiently charged with a public interest to warrant federal 
regulation in the first place should also warrant protection for 
whistleblowers simply as an aid to enforcement and ensuring 
voluntary employer compliance with the underlying safety and 
health requirements. 



WHISTLEBLOWERS 229 



One thoughtful reviewer of the draft of this study 
cautioned that expansion of whistleblower protections to persons 
in highly sensitive positions might make it too difficult to 
remove an incompetent or malicious employee. Where the superior 
can anticipate that his own integrity may be put in issue in the 
adjudicatory process, there may be a chilling effect on his or her 
willingness to take needed disciplinary action. The net result 
would be contrary to the public interest of health and 
safety. 48 / This factor is difficult to assess in empirical terms, 
but there does seem to be a satisfactory response to it: the 
adjudicatory process must be reasonably prompt and reliable, and 
so managed as to offer no reason for malcontents or marginal 
performers to see it as an insurance policy against proper 
discipline. Agency decisionmakers should be alert to the 
detrimental effect on health and safety if managers and 
supervisors form the opinion that turning a blind eye to poor work 
is preferable to the inconvenience of an investigation and 
possible hearing. If supervisors are not to be deterred from 
performing their jobs, the process should be as free of wasted 
time and effort as possible. Nonetheless, as in any disputatious 
setting, there will always be some who are so put off at the 
prospect of a government investigation that they may "put up" with 
a poor performer longer than they should. There is, in this, 
however, nothing peculiar to this setting; how long would an 
unsafe employee be retained even though firing him or her would 
trigger some other kind of discrimination claim? 

2. Protected Conduct . The health and safety 

whistleblowing statutes basically protect two kinds of conduct: 

(a) disclosures and, in a few instances, (b) refusals to work. In 
neither category has Congress acted uniformly. 

(a) Protected Disclosures . Table 4 summarizes the 
statutory provisions that define protected disclosures. As a 
brief review of that listing will show. Congress has used a wide 
range of terms to describe the disclosures it wants to protect. 
It is however, difficult to understand why a uniform set of 
concepts could not be substituted. 

To identify a few of the variations, there are 
provisions that apply to any disclosure (AHERA) disclosures to the 
media ( OSHA) ,49/ disclosures to the agency or agencies responsible 
for administering the underlying regulatory program ( e.g . , ERA) , 
and disclosures to a union (FMSHA, OSHA) or employer (FMSHA, OSHA, 
SMCRA). The circuits are split on whether the ERA protects 
"internal" complaints to an employer. 50/ The underlying validity 
of employee safety concerns under the ERA and environmental 
statutes has been held to be beyond the Labor Department's 
jurisdiction; the disclosure need only be made in good 
faith. 51/ 



230 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Retaliation against concerted activity in response to 
safety concerns has been held to be an unfair labor practice by 
the NLRB, but the Board has recently emphasized that it "was not 
intended to be a forum in which to rectify all the injustices of 
the workplace. "52/ Given the requirement for concerted activity, 
and the Board's emphasis on the fact that the employee in Meyers 
(a truckdriver who was retaliated against for refusing to work and 
reporting a safety violation to state authorities) might have an 
action under state law or (had it been in effect at the time) 
under the STAA, it seems improbable that the NLRA will prove to be 
of substantial benefit to whistleblowers who act alone 
particularly if their conduct might also be protected under other 
legislation. 53/ Indeed, the current Board has expressly 
disclaimed an interest in "taking it upon ourselves to assist in 
the enforcement of other statutes." 54/ This narrow perspective 
would seem to be at odds with the philosophy underlying the 
whistleblower provisions, the basic purpose of which is to assist 
in the achievement of substantive federal health and safety 
objectives. Because the statute of limitations for unfair labor 
practice complaints is longer than most of the whistleblowing 
statutes, contraction of the NLRB's role effectively reduces the 
protection available to employees. Meyers suggests that Congress 
should not look to the broad coverage of the NLRA as a reason to 
refrain from enacting generic private sector whistleblower 
legislation. The case has been appealed again to the District of 
Columbia Circuit. 55/ 

(b) Refusals to Work . Employee refusals to work are 
protected under the Energy Reorganization Act, Federal Mine Safety 
and Health Act, Federal Railroad Safety Authorization Act, Labor 
Management Relations Act, National Labor Relations Act and Surface 
Transportation Assistance Act. 56/ The NLRA protects only 
"concerted activity" under section 7, rather than individual 
conduct. 57/ Unless the refusal to work is part of a group effort 
or is an individual effort intended to enlist the support of 
others, or involves the assertion of a right grounded in a 
collective bargaining agreement , 58/ it will not be protected, 
according to the NLRB's latest pronouncement on the issue. 59/ 
Section 502 of the LMRA applies to employees who stop work "in 
good faith because of abnormally dangerous conditions ," 60/ but it 
is unclear whether the provision protects only those workers 
actually at risk, or others who join with them. 

In addition to the statutory provisions, safety-based 
refusals to work are protected by a regulation issued under the 
Occupational Safety and Health Act ,61/ and upheld by the Supreiae 
Court in VJhirlpool Corp. v. Marshall . 62/ 



WHISTLEBLOWERS 23 1 



The refusal to work provisions typically require that 
the employee have an actual reasonable belief that he is in 
danger .63/ For example, the STAA provides: 

No person shall discharge, discipline, or in any 
manner discriminate against an employee , . . for 
refusing to operate a vehicle when such operation 
constitutes a violation of any Federal rules, 
regulations, standards, or orders applicable to 
commercial vehicle safety and health, or because 
of the employee's reasonable apprehension of serious 
injury to himself or the public due to the unsafe 
condition of such equipment. The unsafe conditions 
causing the employee's apprehension of injury must be of 
such nature that a reasonable person, under the 
circumstances then confronting the employee, would 
conclude that there is a bona fide danger of an 
accident, injury, or serious impairment of health, 
resulting from the unsafe condition. ... 49 U.S.C. 
sec. 2305(b) (Supp. Ill 1985). 

3. Limitation of Actions . As shown in Table 1, the 
range of statutes of limitation applicable to health and safety 
whistleblowing complaints is considerable and, given the plain 
kinship among these statutes, intellectually indefensible. Absent 
some showing that would justify differences from one setting to 
another — and the author has been unable to discern the basis for 
such a showing — a single statute should govern. 

VJhat should the limitation period be? This is 
necessarily a matter of legislative judgment, and should reflect 
the fact that employers are unlikely to tell an employee that he 
or she is being dismissed as a reprisal for whistleblowing. as a 
result of this factor, the employee may not be aware at the time 
of discharge that a statutory right has ben contravened. 

It an employee must file more than a "notice of appeal" 
to trigger the whistleblowing hearing processes ,64/ a 30-day 
statute is unreasonable, even if a notice is required to be posted 
advertising the complaint process. Moreover, an employee may well 
find it impossible to find counsel who can prepare a complaint in 
such a short period, particularly since much whistleblower 
litigation is conducted on a contingent fee basis in the hope of 
securing an award of attorneys fees. As shown in Table 8, a 
significant number of the whistleblowing cases brought to the DOL 
Office of Administrative Law Judges are dismissed for 
untimeliness . Other cases are dismissed for untimeliness by the 
investigative agencies. On balance, and considering the potential 
complexity of these cases, a single statute of limitations of not 
less than 180 days seems appropriate. 



232 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



4. Investigative Arrangements . Table 1 identifies which 
agency is responsible for the investigation of whis tleblower com- 
plaints under the private sector statutes. The Wage and Hour 
Division has been given responsibility for seven of the statutes 
under which hearings are conducted by the DOL Office of 
Administrative Law Judges, as well as for two statutes ( FLSA and 
MSAWPA) under which adjudication is performed by the district 
courts. 65/ OSHA is responsible for STAA cases that are eventually 
heard by the OALJ, as well as violations of OSHA's own 
regulations, which are heard in the district courts. 

The basic issue that emerges from the assignment of 
investigative functions is whether those functions should be 
performed by the agency with responsibility for the underlying 
substantive safety program. On the one hand, if the subject 
matter is complex or technical, it could be argued that only the 
program agency would have the technical expertise necessary to 
evaluate whis tleblower cases. On the other hand, there may be 
concern that the program agency might be less than impartial in 
whistleblower cases to the extent that a whis tleblower ' s charges 
may be thought to imply that the program agency was ineffec- 
tive, ^_6^/ Some program agencies are considered to be too 
sympathetic to the regulated industry, and lack of resources may 
lead to "dispirited" enforcement of safety regulations .67/ 
Congress recognized the possibility that an agency might have a 
conflict of interest, for example, when it broke up the former 
Atomic Energy Commission (which had both regulatory and 
promotional responsibilities) into the NRC and the former Energy 
Research and Development Administration. 6 8/ 

The case for having adjudication handled by the program 
agency based on the theory that substantive expertise in the 
underlying technical field is required is unpersuasive. For one 
thing, the program agency would always be available to supply 
expert witnesses on any truly technical issues, a technique that 
would presumably be used today in those cases that arise under 
statutes where adjudication is handled by the district courts, 
which can claim no special expertise. More to the point, the 
whstleblowing statutes do not require a determination that the 
complainant's safety concern is technologically "correct," but 
rather that it is merely reasonable inthe circumstances. To be 
sure, even that question imposes on the decisionmaker an 
obligation to assess the merits of the worker's health or safety 
concern, but the burden on the decisionmaker would seem to be 
muchless onerous than might be the case if the complainant were 
protected from reprisal only if his or her safety objection was 
not only reasonable but "correct." 

Congress has not yet taken a clear position on the 
generic issue of agency conflicts, although under seven of the 



WHISTLEBLOWERS 233 



whistleblower statutes (DoD87, FMSHA, FRSAA, MSAVJPA, NLRA, OSHA, 
SMCRA) the program agency is also the whistleblowing investigative 
agency .69/ While the statutes under which these roles are 
combined involve technical areas such as the environmental and 
nuclear contexts, certainly there are also technical aspects to 
cases arising under the two mining statutes, under each of which 
the program agency also investigates. To the extent that a 
statutorily independent Inspector General is assigned 
investigative responsibility under DoD87, the danger of 
institutional conflicts of interest would appear to be minimal 
under that particular statute. 

One useful approach might be to recognize that the 
investigation of whistleblowing is itself a specialty, and that 
the public interest would be served by having a single agency 
responsible for all whistleblowing investigations. Which agency 
that should be is not crucial, but presumably it should be one 
that is currently responsible for a substantial share of the 
government's total incoming caseload of whistleblower complaints. 
The available data, 70/ tend to point toward OSHA, although the 
VJage and Hour Division has also amassed valuable experience under 
the varied statutes for which it has responsibility. The choice 
is probably best left to the Secretary of Labor. In any event, 
there is no need to add a brand new agency or additional staff for 
this purpose; the non-OSHA caseload data suggest that inter- 
agency transfers would suffice to meet any shift in agency 
responsibilities. If, on the other hand, substantial new 
categories of employees are brought under whistleblower 
provisions, some net increase in staff would be needed, unless 
there is slack available at present. 

The program agencies should play an active role in 
support of the investigative agencies, even if they do not 
themselves have investigative responsibility. In technical cases, 
the program agencies can (and already do, on occasion) furnish 
technical advice to the investigative agencies. They can also be 
asked to provide expert witnesses or technical interrogators for 
hearings. At times, they might wish to appear as amici in the 
whistleblower hearings. 71/ And, to be sure, they should in each 
case receive reports on the outcome of hearings so that they may 
take whatever followup actions may be appropriate in light of the 
facts developed in the adjudicatory process. These reports should 
include the adjudicatory decisions as well as the investigative 
agency's comments and analysis, where appropriate. 

The program agencies should take affirmative steps in 
aid of whistleblower protection, such as the issuance of employee 
protection regulations that could be enforced in the licensing 
context, where appropriate, as the NRC has done .72/ They can also 
impose useful notice-posting requirements by regulation so that 
employees will know in advance of their rights under the employee 



234 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



protection statutes. 73/ This is particularly 

appropriate if Congress continues to insist on unrealist ically 
short statutes of limitation. 

Concern has been expressed over the short time typically 
allowed to the investigative agencies for processing employee 
complaints. Rather than simply eliminating the investigative 
phase ( e.g. / permitting the employee to institute an APA hearing 
without prior agency screening ) /74/ attention might be given to 
providing that if the investigative agency has not completed its 
investigation within a fixed period, the employee at that time 
could obtain an APA hearing on reguest . 75/ The disadvantage of 
such an arrangement would be that the employee would be deprived 
of the potentially useful initial reaction of the agency: at 
present, a favorable initial ruling may be critical to the 
employee's ability to obtain counsel on a contingent fee 
basis . 76/ 

Another issue concerns the desirability of requiring or 
encouraging an employee to exhaust remedies provided by the 
employer as a precondition to an agency hearing. 77/ Table 5 
identifies those employee protection programs that require or 
suggest such exhaustion. Many firms today have internal 
mechanisms for the receipt of employee safety complaints; a few 
have contracted with outside companies to provide an external 
private dispute-ventilation machinery. 78/ Before a broad 
requirement for such programs is imposed, however, serious thought 
should be given to the fact that an exhaustion requirement may 
only retard employee access to the public adjudicatory process, 
and arguably provide the employer with an unfair opportunity 
forearly discovery possibly before the employee has legal 
representation. If attention is given to requiring such programs, 
the concerned agencies will have to address the discoverability of 
documents generated during the process (a matter that has already 
arisen in at least one case arising under the ERA) 79/ and the need 
to toll the statute of limitations during exhaustion. One 
attorney representing employers has indicated that documents and 
statements generated by both sides in the course of exhaustive 
internal channels would be discoverable. 80/ The author's view, on 
the basis of the information currently available, is that the 
public interest in prompt disposition of employee protection 
complaints outweighs the competing interest in potentially 
reducing the need for recourse to formal governmental processes. 
Certainly public policy "should not aim at driving every internal 
dispute toward litigation , "81/ but the system should also not 
create excessive hurdles. 



WHISTLEBLOWERS 235 



5. Adjudicatory Procedures . Nowhere is the lack of 
consistency in federal protection of whist leblowers more apparent 
than in the arrangements Congress has directed for adjudication of 
complaints . As shown in Table 1, in 8 instances (involving cases 
arising under the environmental laws and the STAA) , on-the-record 
APA hearings and recommended decisions are the task of the DOL 
Office of Administrative Law Judges , 82/ subject to final action by 
the Secretary of Labor ^83/ with the assistance of the DOL Office 
of Administrative Appeals. One source of concern has been the 
lack of detailed regulatory guidance as to the procedures to be 
followed in connection with review by the Secretary. 84/ The 
Department of Labor has shown its concern over the case backlog in 
the Office of Administrative Appeals. 85/ An additional step it 
should take to streamline that final layer of agency review would 
be to promulgate formal rules of appellate procedure . It has also 
been suggested that a 3-member appellate panel should be created 
to review ALJ decisions in whistleblower cases, and to permit 
interlocutory appeals from ALJ decisions on certain issues .86/ 

Like DOL, the NLRB, Mine Safety and Health Review 
Commission and Interior Board of Land Appeals also provide 
on-the-record APA hearings. In railroad cases, the decisional 
body is the National Railroad Adjustment Board which does not 
provide an APA hearing, and in four categories of cases 
(nonappropriated fund employees, shipping containers, migrant 
workers and OSHA) , the adjudicatory mechanism is a civil action in 
district court. 

Given the caseload of the district courts, reliance on 
conventional civil actions rather than appellate court review of 
agency action in several of these important antiretaliat ion 
programs makes little sense. And in the case of complaints under 
section 11(c) of the Occupational Safety and Health Act, such 
reliance makes no sense at all when combined with the fact 
that the complainant has no control over the litigation, i.e. , if 
the agency chooses to dismiss a complaint, the employee can only 
appeal that decision within the Department of Labor ;87/ there is 
no provision for judicial review of the agency's decision not to 
pursue a section 11(c) case and no private right of action under 
that provision. 88/ This is in sharp contrast with the other 
provisions which permit an employee who is disappointed with the 
outcome of an agency APA hearing to seek judicial review. 

Another noteworthy aspect of the adjudicatory process 
involves the responsibility for representation of the employee . 
In MSHRC proceedings, the miner is prepresented by MSHA if the 
agency believes the complaint to be meritorious ,8 9/ but in OALJ 
cases under the envirnomental laws, the Wage and Hour Division and 
the Secretary represent neither party. 90/ Under the STAA, the 
Assistant Secretary for Occupational Safety and Health can 



236 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



prosecute the trucker's case in the OALJ hearing. 91/ Under the 
NLRA, the General Counsel prosecutes. 

Here again, the reasons for the discrepancies from one 
program to another are difficult to fathom. One would think that 
the same rule should apply across the board, but at the same time 
it is not clear tht every complainant will want or need the 
prosecutorial assistance of the investigatory agency. Where the 
complainant is privately represented, the interest in careful 
husbanding of agency resources (including the need to limit what 
might otherwise be redundant presentations in the hearing) 
suggests that the agency should step aside — not dropping out of 
the proceeding, but taking a more passive role, in deference to 
the trial strategy of the party's chosen counsel. That role would 
differ if the individual chooses to represent himself or herself, 
in which case a more active posture would be appropriate, in the 
interest of ensuring a full and effective airing of the issues. 
In short, the Secretary should not be required to represent a 
party who already has counsel, but if the investigatory agency 
concludes that the case is meritorious, it should be available to 
prosecute if the complainant so desires. 

The statutes frequently set forth a schedule for agency 
action on the employee's complaint. 92/ These schedules are more 
honored in the breach than the observance, 93/ and they probably 
serve little practical purpose . 94/ To the extent that they 
indirectly encourage hasty investigative agency positions in 
complex cases, they may well be counterproductive. Table 8 shows 
elapsed time for DOL case processing. To some extent the numbers 
may be misleading since it is often the case that both sides — and 
the ALJ — will agree that more time is needed if the substantive 
purpose of the statute is to be served. Litigants may and often 
do want to relax the schedule in any given case if, for example, 
more discovery is needed, or anticipated procedural or evidentiary 
complexities arise. The consented-to delays do not account for 
all the cases, but they suggest that a "rule of reason" or modus 
Vivendi evolves, whatever the statutory language. The extreme 
delays in some cases are, however, whether consented to or not, a 
matter of concern, and the responsible officials may want to 
ensure that case-tracking mechanisms are in place to keep matters 
from getting out of hand. 

Not suprisingly ,. both employer and employee 
representatives have expressed frustration with the current 
arrangements for DOL hearings. For example, employee counsel have 
called attention to what they perceive as a pattern of discovery 
abuse by industry counsel . 95/ In one current case, there is a 
dispute over whether an employer's counsel frustrated the 
employee's ability to obtain the testimony of a needed 
witness. 96/ On the other hand, some believe that there is a 



WHISTLEBLOWERS 237 



danger of providing a forum for frivolous claims ^ with no penalty 
to the complainant who can impose substantial costs on an employer 
simply by filing a complaint. 97/ This criticism overlooks the 
fact that if a complainant violates an ALJ order, he may be 
defaulted, 98/ although that is not a complete answer to the 
objection. None of the statutes provide for attorneys fees to be 
awarded against complainants. 

To the extent that the current arrangements are 
deficient in failing to provide for judicial enforcement of POL 
subpoenas , that omission should be remedied as soon as possible 
along the lines available for enforcement of other agency 
subpoenas. 99/ Until Congress takes such action, the main 
protection against stonewalling in discovery is the availability 
of adverse inf erences lOQ/ or sanctions such as those provided 
under Rule 37(b)(2) of the Federal Rules of Civil Procedure. 
Sanctions alone, however, are not a sufficient response to willful 
failure to cooperate with discovery in a health or safety 
whistleblowing case because more is at stake than merely the 
outcome of the individual case. The public interest may require 
that the facts be developed in such a case, not simply that the 
individual employee obtain relief, whether through sanctions or a 
settlement. Moreover, even after judicial enforcement of 
subpoenas becomes available, ALJs should still be at liberty to 
draw adverse inferences or impose sanctions in the event of 
failure to make discovery because the need to apply to a federal 
court for subpoena enforcement may be too time-consuming and 
costly for the party seeking enforcement 101/ — even though 
enforcement proceedings are supposed to be summary in 
nature. 102/ A party's failure to press for judicial enforcement 
of an agency subpoena should for this reason not preclude either 
adverse inferences or appropriate agency sanctions. 

Misconduct by counsel — another of the charges levelled 
by the complainant bar — is a serious matter that can thwart the 
achievement of congressional objectives and thereby endanger 
public health and safety. The arrangements currently in place 
certainly give agency decisionmakers ample authority to penalize 
such misconduct, and that authority should be invoked when good 
cause is shown. 103/ In the unlikely event that ALJs prove to be 
indifferent on this score, the Secretary of Labor can be expected 
to take a firm stand on review. In addition, the usual forums for 
the consideration of ethical violations remain available. If the 
misconduct goes to far as to deprive a party of a fair hearing, 
the decision should be set aside on judicial review. 

6. Remedies . The basic remedies available under the 
employee protection statutes are the familiar ones of backpay , 
reinstatement and attorney fees . In some instances, additional 
relief may be ordered. For example, actual damages are authorized 
under a number of statutes, and a variety of kinds of injury have 



238 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



been compensated for under those provisions. 104/ These include 
medical expenses, front pay, and job search expenses. In one ERA 
case, an employee was awarded $10,000 for mental pain and 
suffering and injury to reputation. 105/ Another received $70,000 
"to cover past and future medical expenses . . . and as recompense 
for . . . humiliation and mental suffering. " 106/ Exemplary or 
punitive damages are specifically authorized under only two of the 
environmental employee protection provisions ( SDWA and TSCA) ; in 
other contexts the Department of Labor has held such damages to be 
unavailable. 107/ Why those statutes alone have that provision is 
unclear aside from having been inspired by a common model. There 
is no conceivable reason for this discrepancy; a single rule 
should apply. 

Agencies are also authorized to order abatement of the 
employer's conduct as well as " affirmative action ," although 
little, if any, use has been made of the latter power. It is to 
be expected that future cases will see an increase in use of the 
"affirmative action" power. 

Under the FMSHA and STAA, Congress has authorized 
interim relief of temporary reinstatement pending of complaining 
employees. Under both of these provisions, temporary 
reinstatement without a prior evidentiary hearing has been found 
unconstitutional; in the STAA case, the Supreme Court has the 
matter under advisement . 108/ 

Other remedies may well be available through the pro- 
gram agency if, for example, that agency is responsible for 
licensing the employer in some fashion. This is true under 
the Atomic Energy Act, and the NRC has taken administrative 
action against licensees on the basis of whistleblowing by 
employees. 109/ However, as the NRC has indicated , 110/ "the action 
taken by NRC focuses on the licensee to change the conduct 
of the discriminator. It is not a direct remedy to the 
employee. " 

7. Judicial Review . The arrangements for judicial 
review, outlined in Table, 1, fall into two basic categories. In 
the case of surface mining and railway whistleblowing, review lies 
in the district courts; in the other cases, agency action is 
reviewed in the courts of appeals. Given the similarity of the 
issues likely to be explored in all such cases, uniform review 
at the court of appeals level (in keeping with a prior Conference 
recommendation) would be appropriate once there was underlying 
uniformity as to agency hearing procedures. Since surface mining 
cases go through the Interior Department hearing process with 
review by the Board of Land Appeals, there would seem to be no 
reason to require an intermediate stop at the district 
court .111/ 



WHISTLEBLOWERS 239 



A more fundamental concern nas to do with the fact that 
under OSHA and the Asbestos Hazard Emergency Response Act, if the 
investigatory agency declines to bring a civil action for the 
employee, the employee cannot obtain judicial review of that 
decision, and also cannot bring his own action against the 
employer. Agency decisions not to prosecute are understood to be 
non-reviewable, but that doctrine would seem to have no 
application where an individual employee has been harmed by the 
violation of a prohibition on retaliation. There is no apparent 
reason for closing the courthouse doors to such individuals while 
keeping them open under so many of the other statutes. If nothing 
else, such an approach drives whistlebiowing cases into the state 
courts under state doctrines, even though the federal interest may 
be paramount . 112/ 

8. Interaction with Program Agencies . As Senator 
Grassley stressed at the Conference's October 1, 1986 public hear- 
ing, it is important not only that the whistleblower be protected 
from retaliation, but also that the substantive safety and health 
concern be addressed. 113/ This requires close coordination 
between the agencies responsible for the underlying regulatory 
program and those responsible for administration of the 
anti-retaliation provisions. 

To date, the program and investigative agencies have 
taken some steps to foster coordination to achieve better compli- 
ance with underlying safety and health obligations. Thus, the 
Wage and Hour Division and the NRC have a Memorandum of 
Understanding ("MOU") setting forth the working arrangements 
between their two agencies in nuclear whistlebiowing cases . 114/ 
That arrangement is viewed as ineffective by attorneys 
representing employees . 115/ Similarly, OSHA and the NLRB have an 
MOU for the coordination of litigation under section 11(c) of OSHA 
and section 8 of the NLRA, 116/ and MSHA and the Labor Board have 
entered into an agreement for the overlap in their 
jurisdictions. 117/ Other agencies have not pursued the same 
approach. 118/ For example, the Department of Transportation has 
only an informal working arrangement with the Department of Labor 
for cooperation in cases arising under the Surface Transportation 
Assistance Act, 119/ and EPA (which has substantive responsibility 
for several environmental laws that have ant iretaliation 
provisions) has no written understanding with DOL. It also 
remains possible for a single act of retaliation to trigger more 
than one statutory scheme. Where this is the case, the agencies 
should either be permitted to conduct a joint hearing or one 
should serve as "lead agency" for the dispute. If all federal 
anti-retaliation protections were consolidated, the potential for 
wasteful duplication would be avoided. 120/ 



240 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Given the fact that whistleblower protection is, after 
all, intended to protect public health and safety, formal 
arrangements should be in place to ensure (1) that all 
investigative agencies receive necessary assistance from pro- 
gram agencies, particularly in cases where technical information 
is important; (2) that program agencies receive prompt detailed 
reports of the results of all whistleblowing adjudicatory proceed- 
ings; and (3) that complaining employees be advised of the action 
taken by program agencies to remedy the safety problem about which 
the whistle was blown. 121/ 

9 . Access to Law and Interagency Doctrinal Growth . Two 
final and, to a degree, related concerns involve the public avail- 
ability of decisional law and the impediments to interaction 
between the separate bodies of law being developed by the adjudi- 
catory agencies responsible for the various whistleblower sta- 
tutes. While the decisions of the MSHRC, NLRB, and Interior Board 
of Land Appeals are reported, those of the DOL Office of 
Administrative Law Judges are not. OALJ decisions have been 
available only in Washington. 122/ That office is responsible for a 
substantial portion of the overall whistleblower caseload. The 
result is that litigants before the OLJA have a more difficult 
time ascertaining the law (thus making proceedings less focused 
than might otherwise be the case, as well as making it more 
difficult for employers and employees even to know their basic 
rights). In addition, the desirable goal of cross-fertilization 
between the OALJ and other whistleblower adjudicatory agencies is 
thwarted. This insulation makes little sense and (building on the 
statutory patchwork) tends to retard the development of a coherent 
body of law in this area. 

Fortunately, the Department of Labor has announced that 
it will publish all OALJ and Secretarial decisions in 
whistleblower cases beginning January 1, 1987 . 123/ This is a 
desirable step for which the Department should be commended, 
since employees and employers will be better to determine in 
advance what is lawful and what is not. However, it would also be 
useful if pre-1987 decisions were published as well. It is 
assumed, of course, that appropriate indices will also be 
provided. 

Whether publication of the OALJ decisions is sufficient 
remains an open question. At present, doing research that steps 
from one anti-retaliation program to another is needlessly cumber- 
some because of the variety of reporting services. Publication of 
the OALJ cases will only partially alleviate that problem. If 
digesting and indexing continue to be according to separate 
designs for each agency with responsibility for whistleblowing 
cases, the present system will not have been improved as much as 
it could be. This is not to suggest that the bar currently 



WHISTLEBLOWERS 241 



confronts a "Tower of Babel" in the whistleblowing area, but the 
present arrangements necessarily leave the door open to doctrinal 
variations where these may be unwarranted. If Congress decides to 
bring all private sector health and safety whistleblowing 
jurisdiction under one "roof" with a single set of statutory 
provisions administered by a single agency, this concern will go 
away; if Congress does not, serious attention should be given to 
integrating the reporting arrangements. 

Relation to Prior Conference Recommendations 



The subject matter of this report touches on several 
prior administrative conference recommendations: 

( a ) Compilation of Statistics on Administrative 
Proceedings by Federal Departments and Agencies (Recommendation 
No. 69-6 ) . While the agencies that were contacted were generally 
forthcoming with statistical data, in a number of instances it was 
difficult to obtain important detailed caseload data. The 
Conference may wish to separately evaluate the effectiveness of 
data-gathering and -organization from this perspective. 

( b) Discovery in Agency Adjudication (Recommendation No. 
7Q-4) . In keeping with paragraph 9 of this recommendation. 
Congress should ensure that agency subpoenas may be issued and 
judicially enforced in all whistleblowing cases. 

( c) Subpoena Power in Formal Rulemaking and Formal 
Adjudication (Recommendation No. 74-1) . The APA amendment 
prepared by the Conference would ensure compliance with agency 
subpoenas in whistleblowing cases, thereby improving the quality 
of agency decisionmaking and the record available for judicial 
review. 

(d) The Choice of Forum for Judicial Review of 
Administrative Action (Recommendation No. 75-3) . In keeping with 
this recommendation, it is presumed that review of agencies' 
formal adjudication be in the courts of appeals would be the norm 
with enforcement by the district courts. 

(e) Time Limits on Agency Action (Recommendation No. 
78-3) . The Conference has questioned the use of legislatively- 
imposed time limits. While a modus vivendi has been reached in 
the context of the whistleblowing statutes here reviewed, any new 
legislation should not include such a requirement. Reasonable 
dispatch should still be the goal, as a matter of agency self- 
discipline. The available data suggest that it is unrealistic to 
try to force investigative or adjudicatory process into a rigid 
timetable. However, Congress might want to consider making it 



242 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



clear that if a deadline for agency action passes without such 
action, the employee or employer should be able to obtain an APA 
hearing without having to wait further. Similarly, if final 
action is withheld beyond the date prescribed, judicial assistance 
should be forthcoming more readily than has heretofore been 
permitted by the courts . 124/ 

( f ) Agency Structure for Review of Decisions of 
Presiding Officers under the Administrative Procedure Act 
(Recommendation No. 83-3) . Reference is made below to the need to 
articulate the procedures for secretarial review of decisions of 
the DOL Office of Administrative Law Judges. 

(g ) Preemption of State Regulation by Federal Agencies 
(Recommendation No. 84-5) . It is improbable that a federal agency 
would have occasion to directly address the question of preemption 
in a whistleblowing case, unless, for example, a state remedy had 
been invoked and one side or the other sought to rely on the 
result for collateral estoppel or res judicata purposes. This 
seems unlikely because federal statutes of limitation almost 
certainly mean the federal case would proceed more promptly than 
the state case. Nonetheless, if such an issue were to arise, the 
views of the affected state(s) and other interested parties should 
be obtained in the adjudicatory process through invited amicus 
presentations. Preemption is further addressed below in the 
Conclusions and Recommendations. 

( h ) Coordination of Public and Private Enforcement of 
Environmental Laws (Recommendation No. 85-3) . The information- 
sharing concerns noted in paragraph 2 of this recommendation apply 
mutatis mutandis to federal whistleblower programs. 

( i ) Agencies' Use of Alternative Means of Dispute 
Resolution ( Recormnendat ion No. 86-3) . The Conference's recent 
recommendation concerning ADR arguably bears on the private sector 
whistleblowing cases. While some private dispute-settlement or 
avoidance techniques have been tried with a view to encouraging 
the flow of safety concerns and defusing potential retaliation 
claims (particularly within the nuclear industry), it is believed 
that it would be premature to require any such procedure as a 
precondition to federal administrative adjudication. The 
Conference might, however, want to suggest that the concerned 
agencies consider the statute of limitations tolled while 
permissive internal employer remedies are being exhausted. 



Conclusions and Recommendations 

Clearly there are important questions for Congress as a 
result of any careful examination of the current arrangements for 



WHISTLEBLOWERS 243 



the protection of private sector health and safety whistleblowers . 
Some of these are, the author believes, appropriate for Conference 
reconunendation because they involve issues that are essentially 
policy-neutral. Based on the study results outlined above, the 
Conference should make recommendations to the Congress and 
involved agencies as follows: 

(a) Congress should enact omnibus whis tleblowing 
legislation to replace all extant federal private sector health 
and safety whistleblowing provisions. That legislation should 
include : 

(i) protection for all private sector employees 
(including government contractor employees) and 
state and local government employees against 
retaliation for whistleblowing with respect to 
violations of federal safety and health 
requirements ; 

(ii) assignment of investigative responsibility to 
the Secretary of Labor for all private sector health 
and safety whistleblowing retaliation cases; 

(iii) provision for on-the-record Department of 
Labor APA hearings in all private sector health and 
safety whistleblowing cases, with discretionary 
review by the Secretary of Labor, judicial review in 
the courts of appeals, and enforcement in the 
district courts; 

(iv) a single definition of protected conduct; 

(v) a single statute of limitations of not less than 
180 days; 

(vi) a single provision for remedies (including 
debarment and suspension of government contractors); 

(vii) a grant of subpoena power to the Secretary of 
Labor for whistleblowing investigations and 
hearings, with provision for judicial enforcement; 
and 

(viii) a grant of rulemaking authority to the 
Secretary of Labor with respect to investigative and 
adjudicatory procedures, notice posting requirements 
and mandatory coordination with program agencies. 

(b) Subject to action by Congress as recommended above, 
the Secretary of Labor should: 



244 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



(i) promulgate rules of appellate procedure 
governing practice and procedure in connection with 
the Secretary's review of decisions of the Office of 
Administrative Law Judges; 

(ii) transfer all private sector health and safety 
whistleblowing investigative responsibility to the 
Occupational Safety and Health Administration, since 
(under section 11(c) of Occupational Safety and 
Health Act and section 405 of the Surface 
Transportation Assistance Act) that agency currently 
receives by far the largest number of private sector 
health and safety whistleblowing complaints; 

(iii) develop, in consultation with the agencies 
responsible for the substantive regulatory program, 
detailed written procedures that are as nearly 
uniform as the Secretary deems practicable for 
coordinating investigation, adjudication and 
follow-up in whistleblowing cases; and 

(iv) cause to be indexed and published all ALJ and 
Secretarial decisions in whistleblowing cases, 
including those rendered prior to January 1, 1987. 

In addition to these changes. Congress and the Executive 
Branch may wish to address a number of related issues, such as the 
question of preemption. As was persuasively explained at the 
public hearing held by the Conference on October 1, 1986 , 125/ 
there is a considerable amount of whistleblowing litigation in the 
state and federal courts, resting not on federal whistleblowing 
protections, but on state law doctrines such as the public policy 
exception to the employraent-at-will doctrine. 126/ State law 
doctrines are evolving rapidly in this area, and it would be 
premature to consider legislation preempting state causes of 
action for retaliation that could be adjudicated in a federal 
forum. Given the current doctrinal ferment, this is an area which 
in the words of Justice Brandeis in New State Ice Co. v. Liebmann 
come to mind: 

To stay experimentation in things social and 
economic is a grave responsibility. Denial of the 
right to experiment may be fraught with serious 
consequences to the Nation. It is one of the happy 
incidents of the federal system that a single 
courageous state may, if its citizens choose, serve 
as a laboratory; and try novel social and economic 
experiments without risk to the rest of the 
country .127/ 



WHISTLEBLOWERS 245 



Or, as the First Circuit recently put it in a different context, 
"[t]he cutting edge of reform should be left to uncoerced 
community initiatives." 128/ 

For the moment at least, and mindful of the approach 
the Conference took in Recommendation No, 84-5, the author 
recommends that States be permitted to continue to pursue their 
own courses of legal development. That process, so deeply rooted 
in our federal system, should not lightly be derailed, 
particularly at a time when all federal programs are under 
increasing scrutiny to prevent inappropriate intrusion on areas 
traditionally of concern to the states. 

Another issue--which is potentially freighted with 
political-considerations — is the question of reassigning the 
responsibility for adjudication of safety-based whistleblowing 
retaliation complaints. The processes that led to the creation of 
an independent Mine Safety and Health Review Commission with 
responsibility for such cases and the creation of an independent 
Occupational Safety and Health Review Commission without such 
responsibility probably are of such a nature that recommendations 
for change will be of little utility absent a definite consensus 
among the interested constituencies. 

In the circumstances, the Conference may conclude that 
it would be best advised to confine its recommendations to more 
structural or adjectival matters such as the enactment of uniform 
standards for protected conduct, adjudicatory procedures and 
remedies, strengthening the hearing process through 
judicially-enforceable subpoenas, and rationalization of the 
arrangements for judicial review. 129/ That said, however, it 
would certainly seem that broader coverage of employees in 
industries with health and safety impacts is in order, and that 
all private sector health and safety federal whistleblowing 
protections ought to be administered by a single adjudicatory 
agency in the interest of fostering like treatment of like cases 
and maximizing the development of adjudicative expertise in 
employee protection matters. 

Based on this study, there is reason for concern on 
several fronts, aside from the overall need to restructure, extend 
and rationalize the federal government's protection of health and 
safety whistleblowers in tne private sector. The data indicate 
that in many cases it takes far longer than Congress contemplated 
to investigate and adjudicate whistleblowers' claims. Such 
delays, which may reflect resource problems, can also arise where 
the parties and ALJ conclude that more time is needed to do a 
proper job. VJhere the parties do not so agree, however, the delay 
may deter some complainants. Delay may ill serve employer 
interests as well. In addition, the study suggests a need for 



246 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



greater interagency coordination. Consolidation of adjudicatory 
functions is an important step towards the solution of that 
problem, but so long as numerous program agencies have an interest 
in the subject, the need for improved coordination will be 
substantial. The Department of Labor may want to consider 
addressing this problem by developing a program for regular 
interagency coordination of policies with regard to the protection 
of whistleblowers , with the result a multi-agency omnibus 
Memorandum of Understanding and an established interagency 
coordinating body to encourage communication and interaction among 
the agencies and responsible staff. 

Finally, although nothing in this study should be 
understood as intimating an opinion on whether justice was done in 
any particular whistleblowing case, it is concluded that (1) 
30-day statutes of limitations are unreasonable, (2) 
judicially-enforceable subpeonas are essential to the conduct of 
effective whistleblowing adjudications, and (3) it offends basic 
notions of fairness tnat under section 11(c) of the occupational 
Safety and Health Act or section 211 of the Asbestos Hazard 
Emergency Response Act victims of retaliation have no access to 
the federal courts if their cases are not pursued by the 
Department of Labor. 



WHISTLEBLOWERS 247 



1 Partner, Klores, Feldesman & Tucker, Washington, D.C.; B.A. , 
Queens College, 1965, LL.B. , Harvard, 1968. The author is grateful 
to Professor Marshall J. Breger, Chairman of the Administrative 
Conference, and Jeffrey S. Lubbers, Director of Research, for their 
assistance with this project. Thanks are also due to Michael P. 
Lagnado, Class of 1988, The National Law Center, George Washington 
University, who served as a Research Assistant under a stipend from 
the Conference, as well as the numerous governmental officials and 
members of the bar who were uniformly generous with their time and 
energy. References below to "Tr." refer to the record of a public 
hearing conducted by the Conference in Washington, D.C., on 
October 1, 1986. See 51 Fed. Reg. 32116 (1986) (Notice of 
Hearing) . 

2 In this report the term is also used to cover, where 
appropriate, employee refusals to work based on safety concerns. 
Such refusals are conceptually distinct from the core notion of 
whistleblowing identified in the text. They have, however, been 
treated as one as often as not and are included in this study. 
They are further addressed below under the heading of "Protected 
Conduct." 

3 Other federal laws protect private sector whitleblowers in 
non-health and safety contexts. A recent example is section 3 of 
the False Claims Amendments Act of 1986, Pub. L. No. 99-562, which 
amended 31 U.S.C. § 3730 (1982). In addition, numerous statutes 
prohibit retaliation against persons who complain of 
discrimination. E.g., Title VII, 42 U.S.C. § 2000(e)-3(a) (1982); 
Age Discrimination in Employment Act, 29 U.S.C. § 623(d) (1982). 
Because they do not relate to health and safety programs, these 
provisions are beyond the scope of the present study. Programs 
applicable to federal employees are also beyond the scope of this 
study although they are noted below and applicable legislation is 
identified in Table 2. 

4 See, e.g. , S. 2516, 99th Cong. 2d Sess. (1986) (generic 
protection for employees of government contractors). 

5 Two excellent works that attempt a comprehensive view of 
federal protection of private sector whistleblowers are L. Larson & 
P. Borowski, Unjust Dismissal (1986 & Cum. Supp. Sept. 1986), and 
S. Kohn; Protecting Environmental and Nuclear Whitleblowers; A 
Litigation Manual (Gov't Accountability Project 1985). 

6 The Supreme Court recently held that temporary reinstatement 
of a complainant prior to a full evidentiary hearing does not 
violate the employer's due process rights as long as certain 
preliminary procedures are available, and a full post-reinstatement 
hearing is expeditiously held. Brock v. Roadway Express, Inc. , No. 
85-1530 (U.S. Apr. 22, 1987.) MSHRC regulations comply with this 
standard. 51 Fed. Reg. 16022 (Apr. 30, 1986). 



248 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



7 For earlier recommendations for omnibus legislation see Abbot, 
Remedies for Employees Discharged for Reporting an Employer' s 
Violation of Federal Law , 42 Wash. & Lee L. Rev. 1383, 1400 
(1985); Jenkins, Federal Legislative Exceptions to the At-Will 
Doctrine; Proposed Statutory Protection for Discharges Violative 
of Public Policy , 47 Alb. L. Rev. 466, 513-24 (1983). 

8 United States v. New York Telephone Co. , 434 U.S. 159, 175 n.24 
(1977). 

9 Congress could, for example, pass a law making it a crime to 
interfere with or discourage whistleblowing in areas of activity 
that fall within the federal government's sphere. The Ku Klux 
Klan Act, 18 U.S.C. § 241 (1982), the literal terms of which might 
cover such misconduct, has been given a narrow application, and 
there is no record of it having been used in this fashion. 

10 See, e.g. , 18 U.S.C. § 3059 (1982). 

11 19 U.S.C. § 507 (1982), as amended by Anti-Drug Abuse Act of 
1986, Pub. L. No. 99-570, § 3152. Some states also have laws 
making it a crime not to aid a policeman in an emergency. See 
VJash. Post, Nov. 11, 1972, at A7 , col. 1 (N.C.). 

12 Another disincentive removal would be to debar government 
contractors who retaliate against whistleblowers . This was 
proposed in the case of the Morton Thiokol engineers referred to 
above, see H.J.R. 634, 99th Cong., 2d Sess. (1986), but the matter 
died in committee. One of the engineers has sued the company and 
asserted an FTCA claim against NASA. Boisjoly v. Morton Thiokol 
Inc. , Civil No. 87-194 (D.D.C. filed Jan. 28, 1987), noted in N.Y. 
Times, Jan. 29, 1987, at A16, col. 1. 

13 E.g. , 29 C.F.R. § 24.1(a) (1986). 

14 33 U.S.C. § 1367(e) ( 1982) ; 40 C.F.R. Pt . 108 (1986). See also 
24 U.S.C. § 9610(e) (1982) (CERCLA) ; 42 U.S.C. § 6971 (e) 
(1982)(SWDA) . 

15 See 14 C.F.R. Pt. 314 (1986); 29 C.F.R. Pt. 220 (1986). 

16 See Asbestos Hazard Emergency Response Act of 1986, Pub. L. 
No. .99-519, § 211. 

17 The growth of interest in the whistleblowing area is 
eloquently attested by the fact that scholarly writers now no 
longer feel a need to set out the history. E.g. , Jenkins, Federal 



WHISTLEBLOWERS 249 



Legislative Exceptions to the At-Will Doctrine; Proposed Statutory 
protection for Discharges Violative of Public Policy ^ 47 Alb. L. 
Rev. 466, 467 & n.ll (1983); Bouffard, Retaliatory Discharge; A 
Public Policy Exception to the Employment At-Will Doctrine in 
Maine, 38 Me. L. Rev. 67, 70 n.6 (1986). 

18 Feinman, The Development of the Employment at Will Rule , 20 
Am. J. Legal Hist. 118, 126-27 (1976). 

19 See generally L. Larson & P. Borowski, supra , § 2.04 et seq . 

20 For a summary of federal common law developments in the wrong- 
ful discharge area see L. Larson & P. Borowski, supra , § 11.04. 

21 The best single catalogue of the federal statutes appears in 
L. Larson & P. Borowski, supra , § 11. 02-. 03. Also very thoughtful 
are the articles by William R. Jenkins, cited supra , and Kohn & 
Kohn, An Overview of Federal and State Whis tleblower Protections , 
4 Antioch L.J. 99 (1986). Federal regulations also require state 
OSHA plans to include employee protection provisions. 29 C.F.R, § 
1902.4(c)(2)(v) (1986). 

22 Abbreviations appear in Table 10; citations to statutes and 
implementing regulations appear in Table 9. 

23 Pub. L. No. 99-661, § 942(a)(1), adding 10 U.S.C. § 2409(a). 

24 Section 502 of the Labor Management Relations Act, 29 U.S.C. 
§ 143 (1982), stands on a somewhat different footing from the 
other statutes. It creates no remedy for retaliation, but rather 
prevents an employer from invoking a collective bargaining 
agreement's no-strike clause where one or more employees quits 
work "in good faith because of abnormally dangerous conditions." 

25 See , e.g. , Murphy v. Consolidation Coal Co. , No. 83-ERA-4 ( DOL 
Jan. 17, 1985) (approving settlement under TSCA) ; Murphy v. 
Consolidation Coal Co. , No CH3-1-D ( DOI Jan. 14, 1985) (dismissing 
SMCRA case upon settlement). 

26 Glazer & Glazer, The Whistle-Blower's Plight , N.Y. Times, Aug. 
13, 1986, at A23, col. 1. 

27 Kleinfeld, The Whistle Blowers' Morning After , N.Y. Times, 
Nov. 9, 1986, § 3, at 1, cols. 2,4 (noting conclusion of Glazer 
research). "But that doesn't mean they always are reduced to dire 
poverty and icy isolation. Often, they are reincarnated in some 
new position." Id . 

28 Bauch v. Landers and State of Florida Dep't of Environmental 
Regulation , Dkt. No. 79-SDWA-l (OALJ). See also , e.g. , Chase v. 



250 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Buncombe County, N.C., Pep ' t of Community Improvement ^ Dkt. No. 

85-SVJD-4 (Solid Waste Disposal Act; county landfill employee). In 

contrast/ a state employee was held not protected under the 

Surface Mining Control and Reclamation Act on the theory that the 
state is not a person within the meaning of § 703 of that Act. 

Leber v. Pa. Dept. of Environmental Resources , 780 F.2d 372 (3d 
Cir.), cert , denied , 106 S.Ct. 3294 (1986). 

29 E.g. , McAllen v. EPA , Dkt. No. 86-WPC-l ( OALJ Nov. 28, 1986); 
Conley v. McClellan Air Force Base , Dkt. No. 8 4.-WPC-1 (OALJ Sept. 
12, 1984); McGough v. U.S. Navy , Dkt. No 86-ERA-18 (OALJ Aug. 19, 
1986), slip op. at 3 n.3 (dictum). But see Wensil v. B.F. Shaw 
Co. , Dkt. No. 86-ERA-15 (OALJ July 8, 1986) (DOE contractor 
employees at plant not licensed by NRC held not protected, despite 
plain meaning of statute); Wash. Post, Jan. 8, 1987, A17, col. 1, 
at A18, col. 1 (noting pendency of VJensil jurisdictional issue 
regarding Savannah River DOE plant). 

30 E.g. , George v. Aztec Rental Center, Inc. , 763 F.2d 184 (5th 
Cir. 1985); Holmes v. Schneider Power Corp. , 628 F.Supp. 937 (W.D. 
Pa. 1986); L. Larson & P. Borowski, supra , § 11.03 [20], at 11-38. 
This applies to conventional whistleblowing ; in refusal- to-work 
situations, the employee can seek mandamus to require the 
Secretary to enforce the statute. 29 U.S.C. § 662(d) (1982). 

31 See also Schibley, The Employment-at-Will Doctrine; Providing 
a Public Policy Exception to Improve Worker Safety , 16 U. Mich. 
J.L. Reform 435, 439-40 (1983) (noting deficiencies in COL 
personnel and resources); B. Mintz, OSHA History, Law, and Policy 
342 (1984). 

32 But see 73 U.S. Dep ' t of Labor Ann. Rep. for FY85 121 (1986) 
(reference to "substantial increase" in § 11(c) cases, among 
others) . 

33 Solomon & Garcia, Protecting the Corporate Whistle Blower 
Under Federal Anti-Retaliation Statutes , 5 J. Corp. L. 275, 283 
(1980) . 

34 1984 OSHA Ann. Rep. 56 (1985). 

35 21' 

36 Teamsters for a Democratic Union, Convoy Dispatch , No. 59, at 
3, col. 3 (Feb. 1986). 

37 21- 

38 In FY85 and FY86, the full MSHRC decided 11 cases of safety 
complaints or refusals to work. Three cases involved both kinds 
of discrimination, 5 involved only safety or health complaints. 



WHISTLEBLOWERS 25 1 



and 3 involved only a refusal to work. Letter from L, Joseph 
Ferrara, General Counsel, MSHRC, to the author, Oct. 31, 1986. 

39 Testimony of Hon. Nahum Litt, Chief Judge, OALJ, Tr . 45-46. 

40 See Letter from James Y. Callear, Freedom of Information 
Officer, NLRB, to the author, Sept. 4, 1986. For example, in 

1985, the Board decided 8 cases involving safety-based refusals to 
work. 

41 Off. of Special Counsel Ann. Rep. for FY85 15 (1985). 

42 See Paul v. FMSHRC , No. 85-1801 (D.C. Cir. Feb. 27, 1987) 
(mining engineer held not a miner) . Another controversial issue 
of coverage involves the application of environmental 
whistleblower provisions to prison inmates. See Wash. Post, Feb. 
12, 1987, at A25, col. 3 (noting OALJ ruling that federal inmate 
is protected by Clean Air Act antiretaliation section). 

43 See , e.g . , Department of Energy Order No. 5483. lA; In re 
Mestres , Department of Energy Spec. App. Bd . (Dec. 27, 1984), 
noted in Wash. Post, Jan. 29, 1985, at A17, col. 1. Protection 
may also be afforded under contractual provisions. See Testimony 
of James E. Jensen, Tr. 107 (TVA). 

44 132 Cong. Rec. H2710 (daily ed . May 14, 1986). Rep. flarkey 
proposed debarring the employer. 

45 Pub. L. No. 99-661, § 942, Stat. , adding 10 U.S.C. 

§ 2409. 

46 See N.Y. Times, Sept. 21, 1986, at 1, col. 1 and 36, col. 2 
(claim of discharge in retaliation for refusing to sign report 
that omitted details on flaws in new Army troop carrier) . 

47 Federal Government Contractors Personnel Protection Act of 

1986, S. 2516, 99th Cong., 2d Sess. (1986). S. 2516 would have 
created a federal cause of action, enforceable by the individual 
in district court, for any reprisal against an officer or employee 
of a government contractor for disclosing to an agency information 
the individual "reasonably believes indicates ... a substantial 
and specific danger to public health or safety." The agency head 
would also have been empowered to impose civil penalties of up to 
$500,000 per reprisal, subject to an on-the-record APA hearing 
with judicial review in district court. 

48 Letter from John F. Sherman, III, Assistant Gen'l Counsel, New 
England Power Service Co., to the author, Dec. 15, 1986. 

49 In one case, quoted in S. Kohn , supra , at 28, the Labor 
Department found that disclosures to news media were also 
protected under the WPCA. See also Kohn & Carpenter, Nuclear 
VJhistleblowing Protection and the Scope of Protected Activity 
under Section 210 of the Energy Reorganization Act , 4 Antioch 
Ln.73, 86-89 (1986). ~ 



252 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



50 Compare Brown & Root, Inc. v. Donovan , 747 F.2d 1029 (5th Cir, 
1984), with Kansas Gas & Elec. Co. v. Brock , 780 F.2d 1505 (10th 
Cir. 1985), cert , denied, 92 L. Ed. 2d 724 (1986), and Mackowiak v. 
University Nuclear Systems, Inc ., 735 F.2d 1159 (9th Cir. 1984). 
See also Wheeler v. Caterpillar Tractor Co. , 108 111. 2d 502, 485 
N.E.2d 372, cert , denied , 90 L.Ed. 2d 187 (1986). 

51 S. Kohn, supra , at 28-29 (collecting cases). 

52 Meyers Industries, Inc. , 281 NLRB No. 118, at 19 (Sept. 30, 
1986), pet, for review filed sub nom. Prill v. NLRB , No. 86-1675 
(D.C. Cir. Dec. 11, 1986). See generally Fasman, Labor Board 
Adopts Conservative View on Employee Rights , Legal Times, Nov. 10, 
1986, at 12. 

53 The Supreme Court has recognized that "parties may have a 
choice of federal remedies," Connell Construction Co. v. Plumbers 
& Steamfitters Local Union 100 , 421 U.S. 616, 635 n.l7 (1975), but 
one wonders whether dual federal remedies are necessary in the 
whistleblowing area. If federal whist leblowing legislation were 
reorganized as recommended infra , there would be less need to be 
concerned about limitations on the gloss applied to the NLRA, and 
no need for two federal agencies to address a single issue. 

54 _Id^. Meyers Industries , supra , at 19. 

55 Prill V. NLRB , No. 86-1675 (D.C. Cir. filed Dec. 11, 1986). 

56 See Table 3 infra . While the statute is silent, the Secretary 
of Labor has construed the ERA to protect good faith reasonable 
refusals to work, Pensyl v. Catalitic Inc. , No. 83-ERA-2 (SOL Jan. 
13, 1984), on the theory that the ERA and FMSHA are _in_ pari 
materia . Slip op. at 5. 

57 See generally Nothstein, Employee Refusals to Work , Labor 
(Fall 1982). 

58 NLRB V. City Disposal Systems, Inc. , 465 U.S. 822 (1984). 

59 Meyers Industries, Inc. , supra , at 20. 

60 29 U.S.C. § 143 ( 1982) . 

61 29 C.F.R. § 1977.12(b)(2) (1986). 

62 445 U.S. 1 (1980) . 

63 E.g. , Gateway Coal Co. v. United Mine V^orkers , 414 U.S. 36b 
(1974) (requiring subjective good faith and objective 



WHISTLEBLOWERS 253 



reasonableness under LMRA) . FMSHA § 815(c) has been held to apply 
refusals to work based on a reasonable, good faith belief that the 
safety of another employee will be endangered. Consolidation Coal 
Co. V. FMSHRC , 795 F.2d 364 (4th Cir. 1986). 

64 Compare Richter v. Baldwin Associates , No. 84-ERA-09/10/11/12 
(SOL Mar. 12, 1986) ( pro se complaint, detailed pleading not 
required), with Testimony of Mozart G. Ratner, Tr . 100-01. 

65 The FLSA is not listed on the chart because, although the 
child labor provisions of that legislation have a health and 
safety component, retaliation cases under those provisions are 
virtually unheard of. 

66 Tr. 40-41, 73; GAP-TLPI Testimony at 11. 

67 Letter from Julie Fosbinder, Teamsters for a Democratic Union, 
to Jeffrey S. Lubbers, Dec. 1, 1986 (referring to Bureau of Motor 
Carrier Safety, Dep't of Transportation.) 

68 See Energy Reorganization Act of 1974, § 2(c), Pub. L. No. 
93-438, 88 Stat. 1233. 

69 Under DoD87, investigations are done by the IG, thus providing 
a measure of independence from the procurement agency. On the 
other hand, the IG's report simply goes to the Secretary, who 
naturally has ultimate responsibility for procurement. 

70 See Table 7 infra . 

71 See 29 C.F.R. § 18.12 (1986) ( amici restricted to filing 
briefs ) . 

72 10 C.F.R. § 50.7(c) (1986) . 

73 The NRC has also taken this step. 10 C.F.R. § 50.7(e) (1986). 
The Wage and Hour Division has imposed other notice-posting 
requirements by regulation. E.g. , 29 C.F.R. § 500.76(d)(1) (1986) 
(MSAWPA). See also id . § 516.4 (FLSA); i6_, § 1903.2(a) (OSHA); 
42 U.S.C. § 2000e-10 ( 1982 ) ( EEOC) . 

74 Testimony of Kennedy P. Richardson, Tr. 57-60; See also Letter 
from Kennedy P. Richardson to Jeffrey S. Lubbers, Dec. 2, 1986 
suggesting, in the alternative, that the 30-day limit for WHD 
investigations be precatory). 

75 Cf_. 42 U.S.C. § 2000e-5(f ) ( 1) ( 1982) (aggrieved person may 
institute civil action if EEOC dismisses complaint or fails to sue 
within 180 days of filing of charges.) 



254 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



76 Testimony of Stephen M. Kohn, Tr. 84. But see Letter from 
Kennedy P. Richardson to Jeffrey S. Lubbers, Dec. 2, 1986 at 2-3: 
"The hypothesis that the Wage and Hour Division is necessary to 
induce private attorneys to prosecute Section 210 cases is refuted 
by the fact that no such inducement has ever been necessary for 
common law wrongful discharge claims and the fact that section 210 
authorizes the administrative law judge to award attorney's fees 
which may well exceed what the attorney would otherwise receive 
under a typical contingent fee agreement. Nor is the Wage and 
Hour Division investigation necessary to 'screen out' frivolous 
cases since most private attorneys will decline to undertake cases 
with no plausible merit." 

77 See Testimony of Sen. Charles E. Grassley, Tr. 14. 29 C.F.R. 
§ 516.4 (1986). Another approach might be to encourage or require 
professionals such as engineers to avail themselves of 
professional societies' safety committees when ethical issues 
arise. Unfortunately, these mechanisms are not well known. See 
Lindorff, Engineers' Duty to Speak Out , The Nation, June 28, 1986, 
at 880. In addition, employees often do not have the luxury of 
being able to formulate a request for an opinion, and committees 
such as these lack the tools to find needed facts on issues that 
are often hotly contested, 

78 See generally Wargo, Tracking Employee Concerns , 32 Nucl. Ind. 
No. 1, 3 (Jan. 1985) . 

79 Durham v. Butler Service Group . No. 86-ERA-9 (OALJ 1986), 
discussed in Safety Concerns Programs Challenged by Interveners , 
33 Nnd. Ind. No. 6, 16-17 (June 1986). Access to documents 
obtained under the SAFETEAM program marketed by a subsidiary of 
the Detroit Edison Co., see generally Heffner, Limiting Risk; 
Improving Public Perception of Nuclear Plant Safety Through 
SAFETEAM (remarks at American Nuclear Society Annual Meeting, Nov. 
12, 1985), was permitted, subject to a protective order, in Texas 
Util. Elec. Co (Comanche Peak Stream Elec. Station, Units 1 & 2), 
Dkt. Nos. 50-445 to 446 (A.S.L.B. Dec. 23, 1985). 

80 See Letter from Kennedy P. Richardson to Jeffrey S. Lubbers, 
Dec. 2, 1986, at 2. 

81 J[d. 

82 Applicable procedural regulations appear in 29 C.F.R. Pt . 24 
(1986). See generally S. Kohn , supra , chs. 1, 5-6, 8-9. 

83 See 5 U.S.C. § 557(c) (1982); 24 C.F.R. § 24.6 (1986). 

84 Testimony of Stephen M. Kohn, Tr. 70-71. 



WHISTLEBLOWERS 255 



85 See 73 U.S. Dep ' t of Labor Ann. Rep. for FY85 174 (1986) 
(noting survey performed by IG) . As of October 1, 1986, that 
office reports to the Undersecretary rather than the Solicitor of 
Labor. Testimony of Judith E. Kramer, Tr. 21. 

86 Letter from Mozart G. Ratner to Jeffrey S. Lubbers, Dec. 10, 
1986, at 2. The suggestion for an appellate panel appears to 
contemplate that the panel's jurisdiction would be 
nondiscretionary and that its decisions would not be subject to 
further review by the Secretary of Labor. An alternative might be 
to have a panel to hear argument on behalf of the Secretary, as 
was formerly done in connection with merchant marine disciplinary 
proceedings. See Fidell, Improving Competence in the Merchant 
Marine; Suspension and Revocation Proceedings 45 Mo. L. Rev. 1, 23 
at n.l51 (1980) . 

87 OSHA Inst. CPL 2.45A, 1| 6 (Mar. 8, 1984). 

88 S. Kohn, supra , at 174, c i t i ng Taylor v. Brighton Corp. , 616 
F.2d 256, 258 (6th Cir. 1980). 

89 30 U.S.C. § 815(c)(2) (1982); T. Means, Discrimination and 
Miners' Rights Under the Federal Mine Safety and Health Act of 
1977 21 & n.l05 (1984) . 

90 VJage & Hour Div., Field Operation Handbook § 52x03(e). 

91 29 C.F.R. §§ 1978. 107-. 108, 51 Fed. Reg. 42093-94 (1986). 

92 E.g. , 15 U.S.C. § 2622 ( b) ( 2) ( A) ( 1982 ) ( TSCA) ; 42 U.S.C § 
5851(b)(2) (A)(1982)(ERA); 42 U.S.C. § 7622 ( b) ( 2 ) ( A) ( 1982 ) ( CAA) ; 42 
U.S.C. § 300J-9(i)(2) (B)( i) (1982) (SDWA) ; see also 29 C.F.R. § 
24.6(b)(1) (1986). 

93 Compare S. Kohn, supra , at 3 & n,15, and Letter from Julie 
Fosbinder, Teamsters for a Democratic Union, to Jeffrey S. 
Lubbers, Dec. 1, 1986, at 2 (noting delays of up to 600 days in 
processing STAA complaints), with Brief for Appellants at 49 n.26, 
Brock V. Roadway Express, Inc., No. 85-1530 (U.S.) (suggesting 
that prolonged delay in secretarial decision is not typical under 
STAA), and U.S. Dep ' t of Labor, Off. of Administrative Law Judges, 
Summary of "Traditional" Labor Cases Adjudicated by the Office of 
Administrative Law Judges 56-57 (1984) (postponements granted only 
for compelling reasons; time constraints in whistleblower cases 
"uniquely restrictive"). In one case arising under the ERA, it 
took the Wage and Hour Division over eight months to conclude that 
the 30-day statute of limitations barred the complaint. Rose v. 
Sec'y of Labor , 63 Ad.L.2d 889, 892 (6th Cir. 1986) (Edwards, J., 
concurring). DOL regulations call for the investigation to be 
completed in 30 days. 



256 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



94 These periods are treated as directory, i.e. , precatory. See , 
e.g. , 29 C.F.R. § 1978.114, 51 Fed. Reg. 42095 (1986) 

95 GAP-TLPI Testimony at 4-6; Testimony of Stephen M. Kohn, Tr . 
71-72. 

96 GAP-TLPI Testimony at 4 & 6 n.l3; Galen, An Ethical Furor Over 
a Witness , Nat ' 1 L.J., Dec. 22, 1986, at 3. 

97 Tr. 84-86; see also id . at 97 (testimony of Mozart G. Ratner, 
dubitante ) . 

98 29 C.F.R. § 24.5(e) (4) (1986) . 

99 E.g. , Atomic Energy Act §§ 161(c), 233, 42 U.S.C. § 2201(c), 
2281 (1982); see generally 3 B. Mezines, J. Stein, & J. Gruff, 
Administrative Law § 21.02 (G. Mitchell rev. 1985); 1 K. Davis, 
Administrative Law Treatise § 4.6 (2d ed . 1978); Fed. R. Civ. P. 
81(a)(3). 

100 See Industrial Union Dep't v. NLRB , 459 F.2d 1329, 1336 (D.C. 
Cir. 1972). 

101 16_, at 1339. 

102 E.g. , EEOC v. K-Mart Corp. , 694 F.2d 1055, 1064 (6th Cir. 
1982) . 

103 See , e.g . , Hasan v. Nuclear Power Services, Inc. , No. 86-ERA-2 
(OALJ Sept. 25, 1986) (disqualifying counsel). 

104 See S. Kohn, supra , at 61-62 (collecting cases). 

105 DeFord v. TVA , No. 81-ERA-l ( DOL Apr. 30, 1984), following 
remand from DeFord v. Secretary of Labor , 700 F.2d 281 (6th Cir. 
1983) . 

106 English v. General Elec. Co. , No. 85-ERA-2 ( ALJ Aug. 1, 1985), 
noted in N.Y. Times, Aug. 4, 1985, at 23, cols. 1, 6. 

107 See Table 6 infra ; Landers v. Commonwealth-Lord Joint Venture , 
83-ERA-5, ALJ op. at 17 (1983), noted in S. Kohn, supra , at 64 & 
n.l8. Under several of the statutes, exemplary damages may be 
awarded if a civil action is brought to secure compliance with the 
Secretary's order. See 15 U.S.C. § 2622(d ) ( 1982 ) ( TSCA) ; 42 U.S.C. 
§ 300J-9(i) (4)( 1982) (SDWA) ; 42 U.S.C. § 5851 ( d )( 1 982 )( ERA) ; 42 
U.S.C. § 7622(d)(1982)(CAA). 

108 Brock v. Roadway Express, Inc. , No. 85-1530 (U.S.) (pending); 
see also Southern Ohio Coal Co. v. Donovan , 774 F.2d 693 (6th Cir. 
1985) . 



WHISTLEBLOWERS 257 



109 See 10 C.F.R. § 50.7(c) (1986). 

110 Letter from A.B. Beach, Dep . Dir., Enforcement Staff, Off. Of 
Inspection of Enforcement, NRC, to Jeffrey S. Lubbers, Dec. 10, 
1986. 

111 See , e.g. , Leber v. Pa. Dept. of Environmental Resources , 780 
F.2d 372 Od Cir.), cert , denied , 106 S.Ct. 3294 (1986). 

112 The fact that a § 11(c) case must be brought by the government 
who harms employees by rendering inapplicable any statute of 
limitations. See , e.g . , Marshall v. Intermountain Elec. Co. , 614 
F.2d 260 (10th Cir. 1980) . 

113 The belief that nothing will be done to correct the problem a 
whistleblower discloses tends to discourage whistleblowing. 
Testimony of Sen. Charles E. Grassley, Tr. 12; MSPB, 
VJhistleblowing and the Federal Employee 27-31 (1981), cited in 
Martin, The VJhistleblower Revisited , 8 Geo. Mason L. Rev. 123 
(1985) . 

114 47 Fed. Reg. 54585 (1982), discussed in Kansas City Gas & 
Elec. Co. V. Brock , 780 F2d 1505, 1509-10 (1th Cir. 1985), cert . 
denied , 92 L.Ed. 2d 724 (1986). See also 29 C.F.R. § 24.4(a) 
(1986) (program agency to receive copy of ail complaints). 

115 GAP-TLPI Testimony at 10-11, discussing Ryan v. Brock , No. 
86-4058 (2d Cir. 1986) (ordering DOL to reopen ERA case on basis 
of NRC report) . 

116 See 40 Fed. Reg. 26083 (1975), reproduced in OSHA Inst. Dis. 
4A App. I, at 1-2 (Aug. 25, 1985). 

117 45 Fed. Reg. 6189 (1980). 

118 Testimony of Stephen M. Kohn, Tr . 69-70. 

119 See generally Letter from Anthony J. McMahon , Chief Counsel, 
Federal Highway Admin., to Marshall J. Breger, Chairman, 
Administrative Conference, Sept. 29, 1986. 

120 In some instances, two remedial programs may work at cross 
purposes. For example, in Thomas v. TVA , No. SLO7528610208 
(MSPB May 9, 1986), an MSPB administrative law judge overturned 
the dismissal of a supervisor at a nuclear power plant who had 
been found by TVA to have discriminated against one of his 
supervisors. Although the supervisor had invoked the protection 
of the ERA, he did so after the statute of limitations had 
expired, TVA nonetheless took disciplinary action based on the 



258 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



supervisor's allegations, and it was that action that the MSPB 
proceeding set aside. 

121 Cf_. N.Y. State-City Cornm'n on Integrity in Government, Report 
and Reconamendations on VJhis tleblowing Protection in New York 5 
(Oct. 8, 1986) ("complainant should be entitled to be informed of 
the final disposition of his complaint"). 

122 Testimony of Stephen M. Kohn, Tr . 70. 

123 Tr. 76. 

124 See generally 5 U.S.C. §§ 555(b), 706(1)(1982) (agencies to 
conclude matters within reasonable time; reviewing courts 
empowered to compel agency action unreasonably withheld); e.g. , 
Public Citizen v. Dep't of Health & Human Services , 632 F. Supp. 
220, 226 (D.D.C. 1986). 

125 See generally Testimony of Anthony Z. Roisman, Tr . 76-83. 

126 See generally Fidell, Nuclear Whistleblowing Issues in 1985 
(remarks at American Nuclear Society Annual Meeting, Nov. 12, 
1985), at 6, citing Lang v. Pacific Gas & Elec. Co. , No. 60185 
(San Luis Obispo Co., Cal., Super. Ct.), on removal , Civil No. 
85-6191HLH (CD. Cal.); Hermann v. H.P. Foley Co. , No. 59672 (San 
Luis Obispo Co., Cal., Super. Ct,), on removal , Civil No. 
85-2246-RG ( Bx ) (CD. Cal. May 20, 1985); Stokes v. Bechtel Corp ., 
Civil No. C-84-8038 (N.D. Cal.), and No. 830446 (San Francisco 
Co., Cal., Super. Ct . ) ; Parks v. Bechtel Corp. , Civil No. 
C-84-8037-WHO (N.D. Cal.); Raymond Kaiser Engineers v. Superior 
Court , No. 8027975 (Cal. Dist. Ct. App. Aug. 23, 1984); Berstler 
V. Hirsch , Civil No. 83-6122 (E.D. Pa. July 10, 1983); Atchison v. 
Brown & Root, Inc. , No. 83-29889 (Harris Co., Tex., Dist. Ct.), on 
removal , Civil No. H85-3568 (S.D. Tex.). Stokes and Parks were 
remanded to the California courts. Stokes v. Bechtel North 
American Power Corp. , 614 F.Supp. 732, 735 n.l (N.D. Cal. 1985). 

127 285 U.S. 262, 311 (1932) (Brandeis, J., dissenting). 

128 Anaya v. Hansen , 781 F.2d 1, 7 & n.8 (1st Cir. 1986). 

129 Before any recommendation is made with respect to the 
allocation of responsibility for judicial review, it is assumed 
that the Conference would secure the views of the Judicial 
Conference of the United States and the Federal Judicial Center. 



WHISTLEBLOWERS 259 

Table 1. Private Sector Employee rrotection Statutes 
(Health 4 Safety) 

Statute Program Investigative Adjudicatory Statute of Judicial 

Agency Limitations* Review 

Dist Ct3 90 days N/A 

OALJ 30 days Ct Apps 

OALJ 30 days Dist Cts 

None in Act None in Act N/A 

OALJ 30 days Ct Apps 

MSHRC 60 days Ct Apps 

Nat'l R.R. 30 days Dist Cts 
Adjustment Bd 

60 days N/A 

6 raos Ct Apps 

180 days N/A 

6 mos Ct Apps 

30 days N/A 

30 days Ct Apps 

30 days Dist Cts 

OALJ 180 days Ct Apps 

OALJ 30 days Ct Apps 

OALJ 30 days Ct Apps 

OALJ 30 days Ct Apps 

» The limitation periods refer to the time for fiMng a 
complaint with the investigative agency, rather than for seeking 
judicial review. 





Agency 


Agency 


AHERA 


EPA 


DOL 


CAA 


EPA 


WHD 


CERCLA 


EPA 


WHD 


DOD87 


DOD 


DOD 


EPA 


NRC 


WHD 


FMSHA 


MSHA 


MSHA 


FRSAA 


DOT 
(FPA) 


FRA 


ISCA 


DOT 
(USCG) 


DOL 


LMRA 


NLRB 


N/A 


MSAWPA 


WHD 


WHD 


NLRA 


NLPB 


NLP.B (OGC) 


OSHA 


OSHA 


OSHA 


SDWA 


EPA 


WHD 


SMCRA 


DOI 
(OSMPE) 


OSMRE 


STAA 


DOT 
(FHWA) 


OSHA 


SWDA 


EPA 


WHD 


TSCA 


EPA 


WHD 


WPCA 


EPA 


WHD 



Dist 


Cts 


NLRB 




Dist 


Cts 


NLRB 




Dist 


Cts 


OALJ 




BLA 





260 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Table 2. Public Sector Employee Protection Statutes 
(Health & Safety) 



Statute 


Program 


Investigative 


Adjudicatory 


Statute of 


Judicial 




Agency 


Agency 


Agency 


Limitations 


Review 


ASHDCA 


EDUC 


None in Act 


None in Act 


None in Act 


N/A 


AHERA 


EPA 


DOL 


Dist Cts 


90 days 


N/A 


CSRA 


0PM 


osc 


MSPB 


20 days 


Fed Cir 


D0D8U 


DOD 


DOD IG + 
Components 


OASD(A) 


None in Act 
or regs 


Dist Cts 


E012196 


All 

(less 

militar 


DOL 

y) 


Program 
Agencies 


None 


N/A 



Table 3. Protected Conduct 
Statute Whlstleblowlng Reasonable Refusal to Work Reasonable 







Belief 






Belief 


AHERA 


Covered 


Silent 


Not 


Covered 


N/A 


ASHDCA 


Covered 


Silent 


Not 


Covered 


N/A 


CAA 


Covered 


Silent 


Not 


Covered 


N/A 


CEPCLA 


Covered 


Silent 


Not 


Covered 


N/A 


CSRA 


Covered 


Required 


Not 


Covered 


N/A 


DOD84 


Covered 


Required 


Not 


Covered 


N/A 


DOD87 


Covered 


Silent 


Not 


Covered 


N/A 


E012196 


Covered 


Silent 


Not 


Covered 


N/A 


ERA 


Covered 


Silent 


Covered* 


Required 


FLSA 


Covered 


Silent 


Not 


Covered 


N/A 


FMSHA 


Covered 


Silent** 


Covered 


Pequ ired 


FPSAA 


Covered 


Silent 


Covered 


Required 



WHISTLEBLOWERS 261 



ISCA 


Covered 


Silent 


Not Covered 


N/A 


LMRA 


N/A 


N/A 


Covered 


Required*** 


MSAWPA 


Covered 


Required 
(just cause) 


Not Covered 


N/A 


NLRA«»»* 




Covered 


Subject- 










ive good 










faith 


O^HA 


Covered 


Silent 


Covered (reg) 


Required 


SDWA 


Covered 


Silent 


Not Covered 


N/A 


SMCRA 


Covered 


Silent 


Not Covered 


N/A 


STAA 


Covered 


Silent 


Covered 


Required 


SWDA 


Covered 


Silent 


Not Covered 


N/A 


TSCA 


Covered 


Silent 


Not Covered 


N/A 


wrcA 


Covered 


Silent 


Not Covered 


N/A 


• By 


interpretation. 


Pensyl v. Ca 


tal yt i c , Inc . , 


No. 83- ERA-2 



(SOL Jan. 13, 1984). 

** Safety complaints are protected even if frivolous. Munsey 
V. FMSHRC , 595 F.2d 735, 7^2-43 (D.C. Cir. 1978). 

*** Subjective good faith and objective reasonableness are 
required. Gateway Coal Co. v. United Mine Workers , 414 U.S. 368 
(1974). 

**•* Concerted activities are protected under section 7 of the 
NLRA, but the circuits are split as to the application of this 
provision to individual workers' safety complaints. See Ewing 
V. NLRB . 768 F.2d 51 (2d Cir. 1985); Prill v. NLP B, 755 F.2d 
941 (D.C. Cir.), cert, denied , 106 S. Ct. 313 (1985); NLRB v. 
Esco Elevators. Inc ., 736 F.2d 295 (5th Cir. 1984). On remand 
from Prill , the Board ruled that individuals' complaints are not 
protected. Meyers Industries, Inc ., 281 NLRB No. 118 (Sept. 30, 
1986), pet. for review filed sub nom . Prill v. NLRB , No. 
86-1675 (D.C. Cir. Dec. 11, 1986). 



262 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Table 4. Protected Conduct--Protected Disclosures 



Statute 



AHERA " . . . provided information relating to a potential 

violation of this title to any other person, in- 
cluding a State or the Federal Government" 

ASHDCA ". . . brought to the attention of the public. . . " 

CAA Commencing EPA proceeding, testifying or assisting 

CERCLA Providing information to a state or federal gov- 

ernment, filing proceeding, testifying 

CSRA Any disclosure not specifically prohibited by law 

DODS'* Any disclosure not specifically prohibited by law 

DOD87 Disclosure to a Member of Congress or an authorized 

official of DoD or the Department of Justice 

E0121Q6 ". . . for filing report. . ." (presumably with 

agency by which employee is employed) 

ERA Reporting to NRC (circuits divided on complaint to 

employer), or participating in proceedings 

FMSHA Complaint to MSHA, operator or union, instituting or 

testifying in proceeding 

FRSAA Filing complaint, instituting proceeding, testifying 

ISCA Complaint to USCG 

M.SAV/PA Filing complaint, instituting proceeding, testifying 

NLRA Concerted activities 

OSHA Filing OSHA complaint, instituting proceeding, 

or testifying; construed to include complaints to 
other federal, state or local agencies, employers, 
unions or the media 

"^DWA Commencing proceeding, testifying or assisting 

SMCRA Reporting to DOI , state regulatory authority, 

employer or his representative, or participating 
in adjudicatory or rulemaking proceedings 

STAA Filing complaint, instituting proceeding, testifying 



WHISTLEBLOWERS 



263 



SWDA 
TSCA 
WPCA 



Filing or instituting proceeding or testifying 
Filing complaint, instituting proceeding, testifying 
Filing complaint, instituting proceeding, testifying 



Table 5. Exhaustion of Employer Remedies 



Statute 

AHERA 

ASHDCA 

CAA 

CERCLA 

CSRA 

DOD84 

DOD87 

E012196 

ERA 

FMSHA 



FRSAA 

ISCA 

MSAWPA 

NLRA 



OSHA 



Not required 

Not required 

Not required 

Not required 

Not required 

Not required 

Not required 

Not required 

Not required 

Not required, but encouraged by MSHRC. E.g ., 
Sec'y ex rel . Hogan & Ventura v. Emerald 
Mines Corp ., 8 FMSHRC 1066 (1986), quoting 
Sec'y ex rel. Dunmire & Estle v. Northern 
Coal Co ., 4 FMSHRC 126, 133 (1982). 

Apparently required 

(45 U.?=;,C. sees. 153, 441(c) (1982)) 

Not required 

Not required 

Not required by statute. Refer to collective 
bargaining agreements 

DOL encourages use of alternative remedies 
(29 C.F.R. sec. 1977.18 (1986)); 
employee must attempt to obtain corrective 
action from employer in refusal -to-work cases 
(Whirlpool Corp. v. Marshall. 445 U.S. 



264 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

1, 10-11 (1980)) 

SDWA Not required 

.SMCRA Not required 

STAA Required for refusal s-to-work . DOL encourages 

use of alternative remedies. 29 C.F.R. sec. 
1978.112, 51 Fed. Reg. n2095 (1986). 

SWDA Not required 

TSCA Not required 

WPCA Not required 

Table 6. Remed ies 

Statute Exemplary Damages Temporary Reinstatement 

AHEPA .Statute silent 

ASHDCA Statute silent 

CAA Held to be unavailable by DOL 

CERCLA Statute silent 

CSRA Statute silent 

DOD84 Statute silent 

DOD87 Statute silent 

E012196 EO silent 

ERA Held to be unavailable by DOL 

FMSHA Statute silent Regulation provides 

for temporary rein- 
statement after pre- 
liminary hearing 

FRSAA Statute silent 

ISCA Statute silent 

MSAWPA Statute silent 

NLPA Statute silent 



WHISTLEBLOWERS 265 

0'=;HA statute silent 

SDWA Exemplary damages authorized 

SMCRA Statute silent; possibly 

authorized by regulation 
(43 C.F.R. sec. 4.1204 (1986)) 

■■^TAA Statute silent » 

SV/DA Held to be unavailable by DOL 

TSCA Exemplary damages authorized 

WPCA Held to be unavailable by DOL 

• See Brock v. Roadway Express, Inc ., No. 85-1530 (U.S. Apr. 
22 y 1987) (temporary reinstatement after preliminary hearing does 
not violate due process). 

Table 7. Caseload, FY1985 



Statute Complaints Complaints Cases 

Received Found Dockete< 
Meritorious by OALJ 

N/A 



AHEPA 


N/A 


N/A 


ASHDCA 






CAA 






CEP.CLA 






EPA 






FMSHA 


276» 


97«» 


FPSAA 








ISCA 






MSAWPA 






OSHA 


2433 


291 


SDWA 






SMCA 


1 





uu 



Agency 


Judicial Review 


Hearings 


Commenced 


N/A 


N/A 


N/A 




1 









11 


2 


53 


3 








N/A 




N/A 




N/A 


67»*» 










1 



266 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

STAA 2M8 20 6 ^ 

SWDA 4 1 

TSCA 3 1 

WPCA 3 2 

» Of these, 102 complaints were docketed with FM5>HRC. 

»* Decided by FMSHPC ALJs. 

»*» Cases sent to Solicitor of Labor for possible district 
court action. Perhaps half are pursued; some of those are 
settled. 

Table 8. Wh i st 1 ebl ower Case Chart 

This chart was compiled from records available at the Office of 
Administrative Law Judges of the Department of Labor as of June 
30, 1986. The left side of the chart indicates the disposition of 
each case. The following abbreviations apply: 

Dism ? dismissal 

Sett/Withd c settlement or withdrawal of complaint 

Untime s untimely filing of complaint 

Disc Eq T = Discussion of equitable tolling of 

statute of limitations by ALJ 
Grant Eq T = ALJ held statute to be equitably tolled 
Judg Compl 3 judgment for employee 
Reinstat s complainant ordered reinstated 
Back Pay = back pay awarded ($ amount shown 

where revealed by record) 
Atty Fees s attorneys fees awarded 
Aff Relief s affirmative relief awarded 
Misc Relief s miscellaneous relief ordered 

•secretarial modifications of ALJ rulings are noted. 



WHISTLEBLOWERS 



267 



co:?t% ':?r;praL\-r;orArj.°: ;"-.r-.7:.- 



ed by the 



268 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



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Notes to Table 8 

1 Two acts of retaliation alleged. First held untimely, second 
without merit, 

2 Reversal of ALJ by Secretary of Labor, who granted equitable 
tolling and found for complainant, 

3 Two complaints filed. 

^ Reversal of ALJ by Secretary of Labor, who granted equitable 
tolling and found for complainant, 

5 Complainant had not been fired, 

6 Same 

7 Decision of Secretary of Labor. 

8 Complainant had not been fired. 

Q Waived by complainant, 

10-14 Assumes complainant had filed 30 days after employer's 
action, 

15 Loss to reputation and mental distress award limited by 
Secretary of Labor, 

16 Reversal of ALJ by Secretary of Labor, who dismissed 
compl aint , 

17 Reversal of ALJ by Secretary of Labor on damages for pain 
and suffering, 

18 Reversal of ALJ by Secretary of Labor on reinstatement, 

19 Reversal of ALJ by Secretary of Labor; remanded and 
settl ed . 

20 Secretary of Labore's decision affirmed in part, reversed in 
the part; damages allowed for pain and suffering, 

21-23 See note 10, 

24 Complaint refiled 19 months later, 

25 See note 10, 

26 See note 10, 

27 Overturns Secretary of Labor and ALJ, 



274 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



28 See note 10. 

29 Pemanded and settled. 

30 Remanded by Secretary of Labor; dismissed again by ALJ. 

31 Settled following remand on damages. 

32 Assumes ALJ overturned on equitable tolling. 

33 Secretary of Labor reversed ALJ, orders reinstatement and 
remands for backpay determination. 

3i| Pending. 

35 Remanded by Secretary of Labor for premature cJosing of 
record . 

36 Settled after ALJ decision. 

37 Settled. 

38 Settled after ALJ decision. 

39 Settled before final order of the Secretary. 

^0 Complaint timely; request for hearing untimely. 

^1 Remanded by ALJ to WHD to determine whether violations 
occurred within 30 days of complaint. 

^2 Remanded by ALJ to WHD. 

43 Remanded by Secretary of Labor. 

HH ALJ decision reversed by Secretary of Labor. 

45 Secretary of Labor decision. 

46-49 See note 10. 

50 For STAA cases, statute .of limitations is 180 days, 

51 For STAA cases, OSHA is investigative agency. 

52 Secretary of Labor reversed decision of ALJ and ordered 
relief. 

53 Secretary of Labor decision, 

54 Secretary of Labor decision. 



WHISTLEBLOWERS 275 

55 Secretary of Labor reversed ALJ and denied relief, 

56 Complaint timely, request for hearing untimely. 



276 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



•'^TAA ^9 U..S.C. sec. 2305 (?=;upp. Ill 1985) 

29 C.F.R. Pt. 1978, 51 Fed. Reg. 
i42091 (1986) 

■'^WDA ^2 U.^.C. sec. 6971 (1982); 

29 C.F.R. Pt. 24 (1986) 

T.'=5CA 15 U.^.C. sec. 2622 (1982); 

29 C.F.R. Pt. 24 (1986) 

WPCA 33 U.S.C. sec. 1367 (1982); 

29 C.F.R. Pt. 24 (1986) 



Table 10. Abbreviations 



AHEPA Asbestos Hazard Emergency Response Act 

of 1986 

ASHDCA Asbestos School Hazard Detection and Control 

Act of 1980 

BLA Board of Land Appeals 

CAA Clean Air Act 

CBO Congressional Budget Office 

CERCLA Comprehensive Environmental Response, 

Compensation and Liability Act of 1980 

CSRA Civil Service Reform Act of 1978 

DOD Department of Defense 

DOD84 Department of Defense Authorization Act, 1984 

DOD87 Department of Defense Authorization Act, 1987 

DOI Department of the Interior 

DOL Department of Labor 

DOT Department of Transportation 

EDUC Department of Education 

E012196 Occupational Safety and Health Programs for 

Federal Employees, 1980 

EPA Environmental Protection Agency 

ERA Energy Reorganization Act of 1974 

'^HWA Federal Highway Administration 

FMSHA Federal Mine Safety and Health Act of 1977 

FRA Federal Rail.road Administration 

FRSAA Federal Railroad Safety Authorization Act of 1980 

GAO General Accounting Office 

IG Inspector General 

I'^CA International Safe Containers Act 

LMPA Labor Management Relations Act 

M'^AWPA Migrant Seasonal and Agricultural Worker 

Protection Act 

MSHA Mine Safety and Health Administration 

MSHPC Mine Safety and Health Review Commission 

MSPB Merit Systems Protection Board 



1 



WHISTLEBLOWERS 277 



Table 9. Citations to Statutes and Regulations 

AHERA Pub. L. No. 99-519, sec. 211, Stat. 

ASHDCA 11 U.S.C. sec. 525 (1982) 

CAA 42 U.S.C. sec. 7622 (1982); 

29 C.F.R. Pt. 24 (1986) 

CERCLA 42 U.S.C. sec. 9610 (1982); 

29 C.F.R. Pt. 24 (1986) (semble) 

CSRA 5 U.S.C. sec. 2302(b)(8)(A) (1982); 

5 C.F.R. Pts. 1252-53 (1986); 
32 C.F.R. Pt. 145 (May 9, 1986) 
(DOD cooperation with OSC) 

DOD84 10 U.S.C. sec. 1587 (Supp. Ill 1985); 

DOD Directive No. 1401.3 (July 19, 1985) 

DOD87 Pub. L. No. 99-661, sec. 942, Stat. 

adding 10 U.S.C. sec. 2409 

ERA 42 U.S.C. 5851 (1982); 

10 C.F.R. sec. 50.7 (1986) ; 
29 C.F.R. Pt. 14 (1986) 

FMSHA 30 U.S.C. sec. 815(c) (1982); 

29 C.F.R. Pt. 2700 (1986) 

FRSAA 45 U.S.C. sec. 441 (1982) 

ISCA 46 U.S.C. sec. 1506 (1982) 

LMRA 29 U.S.C. sec. 143 (1982) 

MSAWPA 29 U.S.C. sec. 1855(a) (1982); 

29 C.F.R. sec. 500.9 (1986) 

NLRA 29 U.S.C. sec. 158 (1982) 

OSHA 29 U.S.C. sec. 660(c) (1982); 

29 C.F.R. Pt. 1977 (1986) 

SDWA 42 U.S.C. sec. 300J-9 (1982); 

29 C.F.R. Pt. 24 (1986) 

SMCRA 30 U.S.C. sec. 1293 (1982); 

30 C.F.R. Pt. 865 (1986); 

43 C.F.R. sec. 4.1200 (1986) 



278 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



NLRA National Labor Relations Act 

NLRB National Labor Relations Board 

NRC Nuclear Regulatory Commission 

OALJ Office of Administrative Law Judges 

OA*^D(A) Office of the Assistant Secretary of 

Defense (Administration) 

OGC Office of General Counsel 

0PM Office of Personnel Management 

OSC Office of Special Counsel 

OSHA Wil 1 iams-Steiger Occupational Safety and Health 
Act of 1970 (or Occupational Safety and Health 
Administration) 

OSMRE Office of Surface Mining Reclamation and Enforcement 

OTA Office of Technology Assessment 

SDWA Safe Drinking V/ater Act 

SMCRA Surface Mining Control and Reclamation Act of 1977 

STAA Surface Transportation Assistance Act of 1982 

SWDA Solid Waste Disposal Act 

TSCA Toxic Substances Control Act 

USCG U.S. Coast Guard 

WHD Wage and Hour Division 

WPCA Federal Water Pollution Control Act of 1972 



279 



ADMINISTRATIVE CONFERENCE OF 
THE UNITED STATES 

Report for 
RECOMMENDATION 87-3 



CONTRACTING BY THE FEDERAL 

GOVERNMENT FOR LEGAL SERVICES: 

A LEGAL AND EMPIRICAL ANALYSIS 



by 

William V. Luneburg 

Professor of Law 

University of Pittsburgh 

School of Law 



September 30, 1987 



280 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



TABLE OF CONTENTS 



I . Introduction 

II. Corporate Practice in Retaining Outside Counsel: 
A Point of Comparison 

1. The Presence of Written Guidance 

2. Reasons for Seeking Outside Counsel 

3 . Procedures for Choosing Counsel 

4. Supervision and Control 

5. Fees 

6. Billing Practices 

III. Government Use of Outside Counsel: In 
General 

A. The Personal/Non-Personal Distinction 

B. Standard for Procurement 

C. Procurement Procedures 

1. The Personal/Non-Personal Distinction 

2. Legal Services v 

3. Competition m Contracting Act 

4. Federal Acquisition Regulation 

5. OFPP's Study of Professional Services 
Contracting 

IV. Debt Collection Amendments of 1986 

A. Introduction 

B. Program Detail 

1. Services Covered 

2. Contract Terms 

a) Fees 

b) Control 

c) Miscellanous provisions 

3. Selection Process 

4. Program Reports 

5. Justice Department ' s Implementing 
Regulations 

C. Concluding General Observations 

V. Agency Use of Outside Counsel: A Survey 



CONTRACTING FOR LEGAL SERVICES 281 



A. Federal Deposit Insurance Corporation 

1. Background 

2 . Written Guidance 

3 . Procurement Procedures 

4. Case Management, Supervision and 
Control 

5. Fees . 

6 . Conflicts of Interest 

7. Tracking and Evaluation of Outside 
Counsel Program 

B. Federal Home Loan Bank Board and the 
Federal Savings and Loan Insurance 
Corporation 

1. Written Documentation of Practices 

2. Types of Legal Services 

3 . Criteria for Selecting a Firm 

4. Contractual Undertakings by Outside 
Counsel 

C. Other Federal Departments and Agencies 

VI . Conflicts of Interest 

VII. General Summary, Conclusions and 
Recommendations . 

Appendix A Agency Use of Outside Counsel 

Appendix A-1 Federal Aviation Administration 

Appendix A-2 Veterans Administration 



282 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



I . Introduction 

In the private sector, traditionally corporations have 
obtained needed legal services not only by hiring attorneys to 
work full-time as their employees but also, and commonly, by 
contracting with private lawyers or firms to furnish advice or 
other assistance. The escalating costs of legal services has 
caused reevaluation of this practice, though reliance on outside 
counsel, particularly in the area of litigation, remains 
substantial . 

Contracting for legal services by the Federal Government has 
in the past, and continues to be, the exception rather than the 
rule. Legal services are generally provided by agency staff or 
the Department of Justice. However, the Federal Deposit Insurance 
Corporation and the Federal Savings and Loan Insurance Corporation 
contract out a sizeable amount of their legal work, a large 
portion of which is litigation-related. Their expenditures for 
outside counsel have grown geometrically since the early 1980 's as 
more and more banking institutions within their respective 
jurisdictions have experienced serious financial problems. In 
1985 it was reported that these two government entities together 



An earlier draft report dealing with federal agency hiring 
of outside counsel was prepared for the Administrative Conference 
of the United States by the law firm of Wolf, Block, Schorr and 
Solis-Cohen. The report that follows draws, to some degree, on 
the research and interviews conducted by that prior consultant, 
though the analysis and conclusions contained herein differ 
substantially from the Wolf Block Report. The footnotes herein 
cross-reference the appropriate portions of that report when it is 
expressly relied upon. 

The author would like to acknowledge the efforts of three 
University of Pittsburgh students, Elizabeth C. Detwiler, Stephen 
M. Rosenblatt, and Marianne G. Emig, whose work in conjunction 
with this study was invaluable. Moreover, many federal officials 
took the time to discuss with me the issues raised in this report 
as well as review earlier drafts. Obviously the final product 
reflects my findings and judgments, not necessarily theirs. Of 
particular assistance were William S. Coleman, Jr. (Deputy 
Associate Administrator, Office of Federal Procurement Policy), 
Thomas A. Rose (Deputy General Counsel) and Carroll R. Shifflett 
(Assistant General Counsel) of the Federal Deposit Insurance 
Corporation, and Ronald J. Oberle (Associate General Counsel) of 
the Federal Home Loan Bank Board. 

See , e.g. , Fischer, The Changing Role of Corporate Counsel, 
4 J. Law & Comm. 45 (1984). 

2 
See generally "The Role of Corporate Counsel in Litigation," 

ALI-ABA Course of Study Materials (1986) (hereinafter "ALI-ABA 

Materials"). 



CONTRACTING FOR LEGAL SERVICES 283 



accounted for eighty percent of all fees paid by th| federal 
government to outside counsel during 1983 and 1984. Moreover, 
according to that article, eighteen federal agencies and 
departments (including the FDIC and FSLIC) paid a total of 
approximately $50 million in 1983 and 1984 for the services of 
private lawyers. The statistics thus collected indicated that 
the practice of legal service contracting extended far beyond the 
banking agencies. 

While reliance by private corporations on both in-house and 
outside attorneys is hardly a matter of public concern and debate, 
the Federal Government's similar practice has provoked both 
publicity and debate, though the scope of the government's use of 
private counsel is, in most instances, less on a relative scale 
than in the case of many private corporations. There appgar to be 
at least three basic sources for this differing reaction: 

a. While elimination or encouragement of the government's 
reliance on private attorneys will hardly result by itself in 
balancing the federal budget, the current concern for mounting 
federal deficits and the needs for effective control translates 
into a perceived need to insure that all government operations are 
conducted on a cost-effective basis to the extent that the law 
permits this. Since government personnel costs related to full 
time employee-attorneys may be substantially less (or more) than 
the cost of obtaining private legal assistance in particular 
cases, the "make or buy" decision with regard to legal services is 
potentially a fruitful area for examination. 

b. While "favoritism" in choosing a legal advisor may be bad 
business for a corporation, it may present both that problem and 
more in the public sector. This has a variety of aspects, the 
most important being that the government presumably does not 
operate for the benefit of private entities or individuals who 
have an inside track on obtaining its largesse. It is expected 



^ Nat'l Law J^, Feb. 4, 1985 at 1, col. 3. 

^ Id. The FDIC spent in excess of $30 million in 1983-4 and 
the FSLIC in excess of $8 million during that period. Most of 
this was charged against the estates of the failed institutions, 
not appropriated funds. 

^In addition, the size of the corps of lawyers in the employ 
of the United States Government no doubt prompts a questioning 
reaction when it is revealed that private sector lawyers are also 
relied upon. Statistics indicate that in 1985, the government 
employed over 20,000 lawyers (not counting the federal judiciary) 
See B. CURRAN, SUPPLEMENT TO THE LAWYER STATISTICAL REPORT: THE 
U.S. LEGAL PROFESSION IN 1985 at 3 (1986) (3.1% of all 655,191 
lawyers) . 



284 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



that government moneys will be used largely for "public" purposes 
and not "private" advantage. The very legitimacy, and therefore 
the effectiveness, of the government requires that both the fact 
and substantial appearance of "favoritism" be avoided in 
government contracting. 

c. Finally, the place of the law and the lawyer in 
government must be considered. It is impossible to divorce the 
ideas of government and law, at least as traditionally conceived 
in this country. Law is what knits the various parts of the 
governmental organism together and law is generally perceived to 
be largely the exclusive preserve of the lawyer. From this it can 
be argued that, unless the government's lawyers owe exclusive 
fealty to it in their work (i.e. are its employees which it can 
control), the distinction between the public and private sector 
vanishes and with it the idea that the government exists^to large 
degree to control private activity for a "greater good." 

More specifically, regardless of the difficulties of 
categorizing many types of governmental action as "executive" as 
opposed to "jugicial" or "legislative" for various separation of 
powers issues, most would concede that the authority to sue in a 
judicial proceeding to enforce federal law is "executive power." 
Traditionally it is the lawyer who is the principal actor in the 
execution of this power by his monopoly with regard to access to 
the courts. As the Supreme Court has indicated, responsibility 
for conducting civil litigation in the courts of the United States 
to vindicate "public rights" must be vested in "Officers of the 
United States" appointed by the President or, if Congress 
permissibly so authorizes, by "the Courts of Law" or the "Heads of 
Departments." Unless a private attorney retained to litigate 
for the government is appointed as an "officer," the contract may 
involve an unconstitutional delegation of power where an "Officer 
of the United States" does not possess or in fact does not 



7 
This is not to say, however, that the public/private sector 

boundaries in the United States are clearly distinct. See 

generally Symposium, The Public/Private Distinction , 130 U. Pa. L. 

Rev. 1289 (1982). 

Bowsher v. Synar, 106 S. Ct. 3181 (1986); 
Immigration & Naturalization Service v. Chadha, 462 U.S. 919 
(1983) . 

^ See , e.g. , Buckley v. Valeo, 424 U.S. 1, 138 (1976). 

•^^ Id. at 138-39, 140. 

■^■'•U.S. CONST, art. II, § 2. 



CONTRACTING FOR LEGAL SERVICES 285 



exercise sufficient control over the activities of^Jhe private 
attorney in his or her handling of the litigation. 

Moreover, governmental policy-making itself is a function 
that must ultimately be vested, if not in Congress, then in the 
President or an "Officer of the United States" appoi^Jed in the 
manner prescribed by Article II of the Constitution. To the 
extent that the activities of a private attorney retained by the 
government can be considered to involve policy-making, the need 
for sufficient control by "officers" of the United States is 
similarly present. 

Finally, aside from any constitutional arguments, there are a 
variety of pragmatic considerations which must be considered in 
connection with the government's use of private counsel to perform 



"Officers of the United States" do not include all 
"employees" of the United States; "employees" are "lesser 
functionaries subordinate to officers of the United States." 424 
U.S. at 126 n.l62. As noted later, the distinguishing 
characteristic of a federal "employee" for statutory, and 
presumably constitutional purposes, is the degree of control 
exercised over his or her work. See text at notes 44-52 infra. 
See generally Friedlander v. United States Postal Service, 64 Pike 
& Fischer, Administrative Law (2d) 1337 (D.D.C. 1987) (The court 
rejected a claim that the Postal Service is a business enterprise 
wholly independent of the executive branch of government and 
therefore functions unconstitutionally. In part the court's 
reasoning focused on the degree of control exercized by the 
executive officials, including the Attorney General, over the USPS 
and its activities, including litigation). 

■'■^See Buckley v. Valeo, 424 U.S. at 126 ("any appointee 
exercising significant authority pursuant to the laws of the 
United States is an 'Officer of the United States'"); 140-41 
("rulemaking . . . represents the performance of a significant 
governmental duty exercised pursuant to a public law . . . [and] 
may ... be exercised only by persons who are 'Officers of the 
United States.'"). "Policy-making" delegated by Congress to the 
President or his appointees is currently viewed as an "executive 
function." See Bowsher v. Synar, 106 S. Ct. at 3192 (1986); 
Immigration and Naturalization Service v. Chadha, 462 U.S. at 
953-54 n.l6. 

■"■"^See Melcher v. Federal Open Market Committee, 644 F. Supp. 
510, 523 n.26 (D.D.C. 1986) (composition of Federal Open Market 
Committee to include other than governmental officials held to be 
constitutional, in part because of the nature of the authority 
exercised and the degree of control retained by governmental 
officials). See also Bruff, The Constitutionality of Arbitration 
in Federal Programs (A Report to the Administrative Conference of 
the United States) (May 27, 1987) at 17-23. 



286 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



both litigation and non-litigation services and the degree of 
control required. 

Adequate control presumptively exists when a full-fledged 
employer -employee relationship has been established. This is not 
to say, however, that there are no circumstances where 
countervailing considerations, including the need to conduct 
operations in a cost-effective manner, may not justify some 
departures from the norm. 

Traditionally, most federal agencies have relied on their own 
legal staffs for non-litigation services. Congress has largely 
concentrated litigation^services for the government in the 
Department of Justice. There have been instances, however, 
where a federal entity has been given the power by statute to ^g 
litigate through its own employees or even by outside counsel. 
Moreover, on occasion Justice has entered into memoranda of 
understanding with certain agencies permitting the latter to -.g 
represent their interests in court though their own attorneys. 

The report that follows examines the legal (including policy) 
issues presented by agency use of outside counsel for litigation 
and non-litigation services. The basic questions are (1) whether 
and when such legal services contracting is permitted as a matter 



See note 42 infra. 

■^^See 28 U.S.C. § 3106 (1982): 

Except as otherwise authorized by law, 
the head of an Executive department or 
military department may not employ an attorney 
or counsel for the conduct of litigation in 
which the United States, an agency, or 
employee thereof is a party, or is interested, 
or for the securing of evidence therefor, but 
shall refer the matter to the Department of 
Justice .... (emphasis added). 

See also 28 U.S.C. §§ 516, 518, 519, 547(2) (1982). See generally 
note 42 infra for the reasons for this. 

17 

See, e.g. , 7 U.S.C. § 228a (Department of Agriculture); 15 

U.S.C. § 56 (Federal Trade Commission); 15 U.S.C. § 2061(e) 

(Consumer Product Safety Commission); 42 U.S.C. § 7605 

(Environmental Protection Agency). 

■^®See, e.g. , 10 U.S.C. § 1037 (Department of State); 15 
U.S.C. § 637(b)(1)(E) (Small Business Administration); 22 U.S.C. 
§ 2504 (Peace Corps); 26 U.S.C. § 9010 (Federal Election 
Commission) . 

■"■^See, e.g., 42 U.S.C. § 7605(b) (EPA). 



CONTRACTING FOR LEGAL SERVICES 287 



of law; (2) what considerations should govern the decision to seek 
outside assistance where the necessary authority exists; and 
(3) what procedures must or should be followed in the procurement 
of those services. The three concerns discussed above are central 
to the treatment of these matters. 

The fundamental conclusion of this report is that the 
government may justifiably contract out for legal services where 
it will be cost-effective to do so, but only in a such a manner as 
to avoid the fact or appearance of favoritism and only where close 
control over attorney conduct is either clearly present or 
unnecessary in order to protect the constitutional and other 
concerns noted previously. 

Unfortunately, in practice this general proposition is easier 
to state than apply. For example, it may be cheaper in monetary 
terms to use inside counsel on a case but, because of the lack of 
expertise of agency attorneys, the likelihood of a satisfactory 
result may be less in some, perhaps, unknown degree than if 
outside counsel is used. Unless a statute mandates that a 
particular procedure be followed in procurement, difficult choices 
may be presented in fashioning a procedure that both mitigates the 
costs of delay and at the same time substantially dissipates 
appearances of favoritism. Finally, the degree of control 
necessary in a particular case cannot be decided in the abstract. 
Only close attention to the particular facts and surrounding 
context can result in a satisfactory resolution of this problem. 

As a point of departure, the first section to follow examines 
current corporation practices with regard to retaining outside 
counsel. This offers some insights into practices and procedures 
that may help ensure cost-effectiveness in government use of the 
legal services of non- government attorneys. Then the report 
discusses the law of procurement and civil service as it appl^^s 
to service contracting. The 1986 Debt Collection Amendments, 
which authorize the Department of Justice to contract with private 
attorneys to collect delinquent loans, are then discussed in 
detail for the light they shed on the issues presented. A survey 
of current agency practice focusing on the experience of the FDIC 
and FSLIC follows this. After a short discussion of the 
applicability of federal conflict of interest law, general 
conclusions and recommendations are set forth. 

II. Corporate Practice in Retaining Outside Counsel: A Point of 
Comparison 

As noted at the outset of this report, the federal government 
is not the only entity that both employs on a full-time basis a 
staff of attorneys and also retains outside counsel to provide it 



70 

See text at notes 8-15 supra . 
^■"■Pub, L. 99-578 (approved October 28, 1986) 



288 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



with legal services. This is common practice for most 
corporations and other business entities, though in recent years 
the escalation of the costs of legal services has been a potent 
factor forcing reconsideration of traditional approaches in this 
area. Still apparently forty per cent of the expenditures of 
corporate legal departments is for outside counsel. Obviously 
there are significant distinctions between the federal agency and 
the private sector purchaser which must be considered in drawing 
on the latter 's experience and practices. In this regard the most 
significant differences include the congressional policy of 
vesting the Department of Justice with most of the litigation 
authority of the federal government, along with the public 
interests at stake in government litigation and other legal 
matters . 

Nevertheless examination of private sector practice may be a 
source of good ideas that can defensibly be emulated by the 
various federal agencies and other entities. In fact, as will be 
seen later in this report, at least some federal agencies do 
follow practices that find clear analogies in the corporate area. 
There is no reason to believe that by continuing to study each 
other's approaches to the problems of retaining outside counsel, 
the practices of each cannot be improved. 

As part of the research for this study, an informal survey 
was conducted of corporations with regard to their practices in 
retaining outside counsel. The subjects included businesses 
involved in manufacturing, service and other areas. In addition 



22 

But see ALI-ABA Materials at 9 ("The results [of survey] 

tend to show that despite the large amount of publicity which has 

been given to the growth of in-house litigation departments, the 

bulk of corporate litigation is still handled in the traditional 

way, by outside counsel"). The Charts reprinted in notes 29, 32 

and 37 infra were prepared as part of the 1985 survey of corporate 

law departments by Price Waterhouse. They are reprinted here with 

permission. All rights reserved. 

23 

Id. at 23. 

24 

See text at notes 16-19 supra . 

^^ See text at notes 321-432 infra. 

P f. 

The American Corporate Counsel Association may be a source 
of information for federal agencies interested in learning more 
regarding coporate practice . 

27 

This survey included H.J. Heinz Co., PPG Industries, Inc., 

USX Corporation, Westinghouse Electric Corp., Equimark Corp., 

USAir, Allegheny International, Mellon Bank Corp., Dravo Corp., 

Consolidated Natural Gas Co., Rockwell International, Koppers Co., 

Inc., and the Aluminum Company of America. Since some of the 



CONTRACTING FOR LEGAL SERVICES 



289 



various published materials dealing with corporate practices were 
reviewed. 

The survey and literature disclosed a considerable lack of 
uniformity in the manner in which corporations deal with the 
matter of outside counsel as well as some practices that, on their 
face, might be profitably adopted by federal agencies; 

1. The Presence of Written Guidance . Some corporations have 
no internal documents that relate to the retention and supervision 
of outside counsel. This may be due to the fact that use of 
outside counsel is infrequent. Alternately, only one or a few 
persons may generally be involved in the hiring decision and the 
follow-up and it is not considered essential to write down what 
procedures must be observed. 

Where memorialization of the practices exists, it ranges from 
the general to the very specific. Matters covered in the guidance 
documents include the criteria for deciding when to contract-out 
for the services, the considerations relevant to the choice of a 



(continued from previous page) 

companies consider their approaches to retaining and supervising 
outside counsel "confidential," there is no specific attribution 
in this report for various statements. 

The questionnaire to these companies indicated the following 
areas of interest: 

f- 

1. The type or types of legal services which are provided to 
the company through outside counsel . 

2. The reasons for seeking outside legal advice where the 
corporation already employs attorneys. 

3. The process used to choose a firm or attorney (e.g., some 
type of competitive bidding arrangement). 

4. The criteria employed to choose a particular firm or 
attorney and whether these criteria or the process of choice are 
described in any internal written document. 

5. The type of supervision or control maintained and the 
means for doing this (e.g., weekly status reports). 

6. Conflict of interest or other ethical problems that have 
arisen and how the likelihood of these problems can be reduced. 

7. The range of fees for attorney, paralegal and support 
services paid to outside counsel. 



28 



See note 2 supra . 



290 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



particular attorney or firm to handle a problem, the nature of the 
supervision expected of inside counsel over the outside attorney, 
and reporting and billing practices. 

2. Reasons for Seeking Outside Counsel . There are a variety 
of stated reasons for seeking outside legal services. For some 



29 



See generally ALI-ABA Materials at 30, 50-53. 



1 

o 

<< 


L 
PERFORM 

Lltlgotion ■ 
Antitrust ■ 
Real Estote 
Empioyment/LODor ■ 
Cenerol Corporote ■ 
Potent ■ 
Government Relations ■ 
Tox ■ 
Energy /Environment 
mtamotionol 

Other - 


-EGAL FUNCTIONS 

ED BY OUTSIDE COUNSEL 
























msM^^^mBKomn \q 


Product Liability • 
Insuronce 
Consumer ■ 






B^BIHBBB 19 




BBB^lHn ?« 




10 ZO >3 40 X) to TO CO «0 100 

CROUP PERCE^JTAC£ 



CONTRACTING FOR LEGAL SERVICES 



291 



corporations, litigation is always, or almost always, the preserve 
of outside counsel . Often one of the principal motivating factors 
in the hiring decision is the limit on staff resources and time to 
do necessary work. Somewhat related to this is the need for 
specialized expertise that cannot be found within the 
corporation's ranks. However, where a particular type of legal 
problem is likely to recur, the argument for hiring additional 
staff to deal with that situation may prevail depending on a 
variety of factors, including the cost of hiring outside counsel 
on a regular basis to handle such cases. Where lack of in-house 
expertise is cited as a reason, often the legal issues presented 
are governed by local or state law or by certain aspects of 
federal law that are generally within the domain of specialists. 

In some instances corporations ask for the legal advice of 
outsiders because of a particular need for "independence" in the 
rendering of the opinion or as a check on an opinion rendered 
internally in an area where the inside lawyer may have some 
experience but not as much as outside counsel and some "comfort" 
might be obtained by confirmation of the inside view. In other 
cases outside counsel, because of his or her prior contacts with 
the decisionmaker or otherwise, may have knowledge of the 
decisionmakers ' concerns not possessed by the employees of the 
client or be perceived by the decisionmaker as someone who should 
be listened to closely. Somewhat along the same line a local judge 
or jury may view with skepticism or hostility presentations by 
attorneys coming from outside the district. Or, finally, the cost 
for the corporation of transportation to and lodging in the 
geographical location of trial may be so great that the only 
cost-effective manner of proceeding is to hire locally. 

3. Procedures for Choosing Counsel . The survey disclosed few 
instances where a formal bidding procedure for hiring outside 



(continued from previous page) 



POLICY REASONS FOR RETAINING 
OUTSIDE COUNSEL 



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292 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



30 
counsel was adopted. Apparently an underlying assumption is 

that competitive procedures may not adequately permit examination 

of the quality of the service provider, though, as will be noted 

below, procedures for competitioo^can be designed to consider both 

cost and other relevant factors. While formal competitive 

procedures might be eschewed by corporations, however, informal 

cost comparison between firms is often engaged in. 

A corporation may have a continuing relationship with a firm 
or firms in a particular geographical area or areas. This 
relationship may give rise to confidence by the client that the 
firm will give it good work at an economical price and, therefore, 
little shopping around for alternatives may be engaged in as needs 
for legal services arise. These firms can also provide references 
to other lawyers where the firms cannot, for one reason or other, 
provide needed assistance to the corporation. 

Many companies surveyed maintained lists of firms which had 
been used in the past as a starting point for the search for a 
lawyer. In one case the corporation maintains a computerized list 
of firms presently employed or those utilized within the recent 
past along with a list of firms which have not been relied for 
several years. This listing, periodically updated, includes 
evaluations of the firms and their lawyers based on the quality of 
work product, promptness, responsiveness and depth of research, 
cost of handling matters, and results obtained on prior occasions. 
That listing also includes the rates charged in the past and on 
pending cases along with the types of work performed by the firms 
listed. 

Where there is written guidance regarding criteria for 
determining when to go outside and whom to choose, there may be 
instructions to staff regarding the considerations that should be 
taken into account to insure that the hire is cost-effective. 

4. Supervision and Control . The degree of supervision and 
control of the work of outside counsel by corporate employees 
varies from little to a "team" approach whereby inside and outside 
counsel work hand in hand. In some instances corporate legal 



30 

Id. at 31. See also note 32 infra . 

31 

See text at notes 165-68 infra. But see note 201 infra . 

"^^See ALI-ABA Materials at 32. 



CONTRACTING FOR LEGAL SERVICES 



293 



departments routinely exercise close control. For other 
corporations the extent of control is decided on a case by case 
basis. Even where corporate counsel is not part of the "team," he 
or she may have to be copied on all pleadings, motions, and 
correspondence prepared, at least where they are deemed 
"significant" by the outside attorney handling the matter. There 
may be a requirement imposed generally or in specific cases for 
prior approval of any pleadings, motions and other documents of 
importance. In some instances the corporation may reserve the 
right to approve all discovery or may in fact take over the 
pretrial aspects of a case entirely. 

At the time a matter is referred to outside counsel, a 
general plan for handling the case may be jointly agreed upon by 
corporate counsel and the attorney retained. A litigation budget 
of some detail may also b^gagreed upon and periodically updated as 
a method of cost control. Moreover corporate counsel may be 
involved in approving which particular associates and paralegals 
work on the case or at least signing off on a general proposal for 
staffing. Outside counsel may be instructed that the corporation 
will not pay for the time necessary to educate new members of the 
"team" regarding the case and the issues raised where there are 
staffing changes. Time for basic legal research in an area 
necessary to educate firm lawyers may not be billable to the 
client. Management programs, including proprietary, 
standardized forms and associated software, are available to 
control litigation costs. 



(continued from previous page) 



OUTSIDE COUNSEL 
N/ETHODS TO MONITOR ACTIVITIES/EXPENSES 

LEGEND 

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33 



34 



Id. at 138 



Id. at 74 



35 



Id. at 93-123. 



294 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



In order to avoid misunderstandings regarding the 
expectations and restrictions applicable to the outside counsel in 
handling legal work assigned, the corporation may distribute to 
outside attorneys a written description of the procedures which 
apply to the handling of the case. For this reason or others, 
the decision to go outside, the choice of counsel, and the 
supervision activities may be concentrated in the general 
counsel's office of the corporation. 

Written status reports may be required, though some 
corporations seem to think that this is not a cost-effective way 
to maintain control and supervision. It may create billable 
attorney time which can be saved by a phone call. 

5y Fees . Naturally fee arrangements vary with the type of 
work. Where hourly rates are charged, they generally range from 
$80 up to $300 depending on the nature of the problems presented, 
the geographical location where the services are rendered, and the 
expertise and repute of the lawyer or firm hired. Fees for 
paralegals generally range from $25 to $70. Flat fees and 
"sharing" arrangements are utilized on occasion. However, it is 
often not the hourly rate that is crucial in the decision to 
retain outside counsel because, for example, the overall bill for 



Id. at 66-80 (for an example of a written description of 
the procedures which apply to a firm when handling a case for 
CIBA-GEIGY Corp. ). 



37 



See ALI-ABA Materials at 31. 



OUTSIDE COUNSEL 
FINANCIAL AND FEE ARRANGEMENTS 



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CONTRACTING FOR LEGAL SERVICES 295 



an experienced, but high-priced, attorney may be less than if the 
work is billed at a lower rate by one who has had little exposure 
to the issues raised. Of course, even if the cost is greater, the 
quality of work may justify the larger fee. 

Discounts in normal fee are often negotiated and fee 
comparisons between firms may be made before choice of an 
attorney. Moreover, once the relationship is established, the 
corporate client may require notice and advance approval before a 
rate schedule for partners, associates and paralegals is increased 
and the client is expected to pay the increased fees. Some 
corporations specify^the type of overhead charges for which it 
will be responsible. They may also indicate that where work is 
done on their behalf that might be used for other clients (and for 
which those clients may be billed) an appropriate discount of the 
fees charged to the corporate client is expected. Furthermore, 
cost control may be achieved by refusing to pay for 
familiarization with the case of partners, associates and 
paralegals who replace other such personnel in handling the 
matter . 

6. Billing Practices . A requirement for monthly invoices is 
not uncommon. This allows the corporate client to keep a close 
watch on costs before they skyrocket out of control. Information 
requested from outside counsel on invoices for payment generally 
includes the names of the individuals performing the services 
during the reporting period, the hourly billing rates for them, 
the dates of work, description of the work done and time spent, 
miscellaneous charges for which reimbursement is sought, and the 
aggregate amount of the fees billed on the matter to date. 

Clearly many corporations are increasingly taking stegs to 
insure that the use of outside counsel is cost-effective. It is 
also the case that where a corporation does a significant amount 
of litigation in-house, one of t^e main reasons for this is the 
perceived need for more control, a factor which is an extremely 
important consideration with regard to federal |jencies ' 
utilization of the services of outside counsel. 

III. Government Use of Outside Counsel: In General 

In obtaining legal services, whether or not of a purely 
advisory nature, two bodies of law are potentially relevant: the 
law of civil service and public contract law. The former is 
largely in the domain of the Office of Personnel Management (0PM). 




296 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



The latter is regulated to a great degree by the General Services 
Administration and the Department of Defense along with the Office 
of Federal Procurement Policy (OFPP) within the Office of 
Management and Budget. The relationship between the agency and 
the person providing services may fall wholly within the civil 
service regime, wholly within the realm of government procurement 
law, or span both systems of regulation. Generally speaking, when 
an employer/employee relationship has been established, civil 
service law provides the applicable governing restrictions. When 
the service provider is acting as an independent contractor, 
procurement principles alone control. In determining how to 
characterize the relationship, the degree of government 
supervision and control over the work of the service provider is 
of upmost importance. 

Viewing matters in this manner, one of the principal issues 
raised by agency retention of outside counsel relates to the 
matter of control. In view of the governmental, piiblic and 
private stakes at issue where legal services are rendered, should 
an agency use other than full-time employees which it can control 
and supervise on a continuing basis? Where the agency wants to 
obtain merely an outsider's legal evaluation, the need for close 
control over the performance of the attorney's work would appear 
not to be generally called for. However, where the attorney 
litigates on behalf of the government, there are serious questions 
whether the agency should (or can in some instances) surrender 
that degree of control necessary to perroit characterization of the 
contractor as "independent" as that term is generally used in 
government personnel law. The degree of control requisite in 



42 

The Justice Department has noted: 

The authority of the Attorney General over 
litigation is recognized by law, see 5 U.S.C. 
§ 3106 and 28 U.S.C. §§ 516, 518, 519, and 
547(2). This authority is supported by both 
constitutional doctrine and eminently 
practical considerations. 

. . . [T]he Supreme Court has held that 
"primary responsibility for conducting civil 
litigation in the courts of the United States 
for vindicating public rights" may be vested 
only in "Officers of the United States" who 
have been appointed in conformance with the 
provisions of the Appointments Clause. 
Buckley v^ Valeo , 424 U.S. 1, 140 (1976). If 
the private counsel who are hired to represent 
the United States are not appointed as 
officers of the United States, it is 
questionable whether they may execute the law 
by engaging in negotiation, compromise, 
settlement, and litigation on behalf of the 



CONTRACTING FOR LEGAL SERVICES 297 



furnishing legal services in matters falling between these 
extremes is less clear cut, though, aside from constitutional 



(continued from previous page) 

Attorney General. In particular, we do not 
believe that individuals who are not officers 
of the government may commit or dispose of the 
property of the United States as would be 
implicated in the power to initiate or settle 
a claim. 

The practical considerations include the 
risk of inconsistent positions being put 
forward on legal issues, the possible 
resulting burden on the citizenry, and the 
waste resulting from duplication of effort. 
The benefits of having the government's legal 
business concentrated in one well-trained and 
experienced corps of litigators, committed to 
government service and subject to the 
supervision of the nation's chief legal 
officer, are obvious. 

The broad use of private attorneys for 
litigation on behalf of the United States 
would, almost inevitably, result in 
inconsistent litigating positions. Further, 
private law firms may not be familiar with 
general litigating policies of the government 
or with the government's interests in other 
areas of the law. The uncoordinated 
activities of private attorneys could thus 
have a detrimental effect not only on the 
conduct of particular litigation but also on 
the government's litigating efforts generally. 

Lack of adequate supervision and control 
is also likely to result in increased 
governmental exposure to suits seeking damages 
for the acts and omissions of such private 
counsel. Attorneys without experience in 
representing the government, and without 
day-to-day supervision by experienced 
government officials, would be unfamiliar with 
the special problems of public practice and 
the special standards of conduct to which 
government attorneys are generally held. 
Conversely, for the Department to expend the 
substantial resources necessary adequately to 
supervise private counsel . . . would almost 
certainly make the retention of private 
attorneys uneconomical and impractical. 



298 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



43 
concerns, the need to protect the governmental and public 

interests at stake would seem, as a policy matter, to create at 

least a presumption in favor of substantial supervision and 

control. Agencies may not be able to both retain close control 

and escape the restrictions applicable to government employees 

filling legal service positions. Where supervision and control of 

an outside attorney is sufficient to justify a classification of 

the attorney as an "employee" of the government, the agency will 

have to point to specific statutory authorization for the hire 

and, in addition, may be subject to certain aspects of government 

personnel law. 

Moreover, other considerations may influence an agency's 
structuring of its relationship with the legal service provider. 
On the one hand, limitations on compensation and conflicts of 
interest which attach to employment, but not independent 



(continued from previous page) 

All of these problems would be compounded 
if agencies other than the Department of 
Justice were given authority to contract for 
private litigation services. The possibility 
of inconsistent positions being taken in 
litigation would become a virtual certainty, 
with a predictably adverse impact on the 
government's general litigating program. 
Decentralization could increase the risk of 
losing otherwise meritorious cases, and of 
adding to the government's liability in terms 
of counterclaims and negligence actions. If 
it would be difficult for the Department 
effectively to supervise and efforts of 
private counsel without the expenditure of 
siibstantial attorney resources, it seems 
doLibly unlikely that the Department or any 
agency could do so with respect to attorneys 
hired by other agencies. 

Letter of Arnold I. Burns, Deputy Attorney General, Department of 
Justice to the Honorable Marshall J. Breger, Chairman, 
Administrative Conference of the United States (Nov. 10, 1986) 
(hereinafter "Burns Letter"). 

It should be noted that the thrust of this letter is to 
support vesting litigation power in the Department of Justice. 
Congress has not always done so. See text at notes 17-19 supra . 
Where it has not, however, many of the same arguments invoked by 
Justice argue for close control by the agency vested with 
litigation authority. 

43 

See text at note 14 supra . 



CONTRACTING FOR LEGAL SERVICES 299 



contractor, status may inhibit obtaining the service provider 
which the agency wants to retain. On the other, competitive 
procedures attach to the procurement of services and limit agency 
discretion to a degree which may be found undesirable. There may 
be no ideal resolution of the tensions thereby created. Moreover, 
as noted previously, in some cases (perhaps rare ones) both 
systems of regulation may attach to some degree. 

In retaining outside counsel, whether in a purely advisory 
capacity or otherwise, an agency must make a variety of inquiries: 

1. Is there authority, statutory or 
otherwise, for the retention? While the 
agency's organic statute may seem to 
permit it, detailed analysis of both the 
relevant statutes and the type of 
relationship sought to be established is 
required. For instance, where the 
attorney will litigate, even though the 
agency may have statutory authority to 
enter into an "employment" relationship 
with outside lawyers in some 
circumstances, the statutes vesting 
litigation responsibility in the 
Department of Justice may limit what 
appears to be a broad grant of authority. 

2. Has there been a demonstration of need 
sufficient to justify seeking assistance 
from other than agency staff? A strong 
showing of need may in fact impact on the 
resolution of the first issue, that is, 
the authority to contract out the service 
( e.g. inherent authority). 

3. What procedures and restrictions (such as 
compensation limits) apply to the hire? 
This requires statutory analysis, 
examination of trans-agency and 
agency-specific rules in addition to 
examination of the type of relationship 
created by the contract. 

The discussion that follows focuses first on the crucial 
distinction between "personal" and "nonpersonal" services, which 
distinction is in essence another way to phrase the 
employee/independent contractor dichotomy. These distinctions 
largely determine whether a particular relationship is subject to 
0PM or OFPP jurisdiction. Statutes authorizing the hiring of 
attorneys as "employees" are examined in this part. 

Then attention turns on the standards for determining whether 
an agency should exercise its discretion to obtain the services of 



300 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



non-governmental personnel where they will serve as independent 
contractors or otherwise. 

Finally the procurement procedures mandated by statute and 
regulation that apply to personal and nonpersonal service 
contracts, particularly those of relevance in the area of attorney 
services, are outlined in general terms. 

A. The Personal/Non-Personal Distinction 

An "employee" within the meaning of the civil service laws is 
a person: 

(1) appointed or employed in the civil service by a Federal 
officer or employee performing in an official capacity; 

(2) engaged in the performance of a Federal function under 
authority of law or an Executive act; and 

(3) supervised and directed by a Federal official or 
employee . 

In determining whether a person should be considered an 
"employee," the Civil Service Commision (now the Office of 
Personnel Management) adopjed the so-called "Pellerzi Standards" 
and "Mondello Supplement." When the relationship between the 
government and the service provider becomes that of 
employer/employee, a contract for such services is denominated 
"personal . " 

The Federal Acquisition Regulation (FAR) succinctly explains 
the situation as follows: 

a personal service contract is characterized 
by the employer-employee relationship it 
creates between the Government and the 
contractor's personnel. The Government is 
normally required to obtain its employees by 
direct hire under competitive appointment or 
other procedures required by the civil service 
laws. Obtaining personal services by 
contract, rather than by direct hire, 
circumvents those laws unless Congress has 



^^5 U.S.C. § 2105(a) (1982). See also FEDERAL PERSONNEL 
MANUAL, Chap. 304 at 304-3. 

^^ See generally Lodge 1858, Am. Fed. of Gov't Emp. v. Webb, 
580 F.2d 496, 499-500 (D.C. Cir. 1978). For a restatement of 
these standards, see text at notes 51-52 infra. 



CONTRACTING FOR LEGAL SERVICES 301 



specifically authorized acquisition of the 
services by contract. 

Differentiating between "personal" and "non-personal" services in 
concrete settings poses significant difficulties for procurement 
officials. An employee-employer relationship may occur either 
as a result of the contract's termsgor the manner of its 
administration during performance. The key question in each 
case is whether the contractor's personnel are subject to the 
"relatively continuous supervision and control" of a Government 
officer or employee. Each contractual arrangement must be 
assessed in light of its own circumstances. 

The FAR lists various elements which are considered in 
determining whether an employer-employee relationship has been 
established. Of the six listed, at least three seem to be 
particularly relevant in the area of attorney services: 

(3) Services are applied directly to the 
integral effort of agencies or an 
organizational subpart in furtherance of 
assigned function or mission. 

(4) Comparable services, meeting comparable 
needs, are performed in the same or 
similar agencies using civil service 
personnel. 



(6) The inherent nature of the service, or 
the manner in which it is provided 
reasonably requires directly or 
indirectly. Government direction or 
supervision of contractor employees in 
order to — 



"^^48 C.F.R. § 37.104(a) (1986). 

47 

See generally Lovitky, The Problems of Government 

Contracting for Consulting Services , 14 Pub. Cont. L.J. 332, 341 

(1984); Byers, Recognizing Personal Services Contracts . D.A. Pam, 

27-50-121. 

"^^48 C.F.R. §§ 37.101, 37.104(c)(1) (1986). 

^^Id. § 37.104(c)(1) (1986). See also Lodge 1858, Am. Fed. 
of Gov't Emp. V. Webb, 580 F.2d at 504. 

^^Id. § 37.104(c)(2) (1986). 

Id. § 37.104(d). See also Lovitky, supra note 47, at 
341-2. 



302 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



(i) Adequately protect the 
Government ' s interest ; 

(ii) Retain control of the function 
involved; or 

(iii)Retain full personal 

responsibility for the function 
supported in a duly authorized 
Federal officer or employee. 

With regard to the services of attorneys in the conduct of 
litigation, the element listed last (6) would appear to be 
particularly implicated, though no one factor may be dispositive 
in finding that services are personal. For example, as will be 
noted below, the 1986 Debt Collection Amendments authorize the 
retention of private attorneys to collect non-tax indebtedness 
owed the federal government. The_legislative history and the 
executive interpretation of the law emphasize the need for 
substantial control over the efforts of these contractors. 

As Professor Rotunda has observed, while an attorney 
possesses a certain degree of autonomy in performing services for 
a client, there is a considerable area subject to client control. 
The more sophisticated the client the more likely control will 
(and perhaps should) be exercised. The federal government is 
obviously such a sophisticated "client." Where an attorney is 
asked for more than his legal opinion and where the actions which 
he takes based on his judgment will have a direct impact on 
members of the general public, as a matter of good administrative 
policy (and also in recognition of constitutional concerns) close 
supervision and control by the agency would appear to be called 
for in many instances. This would seem to be particularly true in 
the area of litigation where historically the government and 



Id. § 37.104(d)(3), (4), (6). The other elements mentioned 
are performance on site (1), tools and equipment furnished by the 
government (2), and the need for the type of service can be 
expected to last beyond one year (5). Id. 

See text at note 50 supra . 

*See text at notes 223-24 infra . 

See text at notes 246-68 infra. See also Burns Letter, 
supra note 42 ("Moreover, it is intended that there will be close, 
day-to-day supervision of such private counsel . . . . " ) . 

See Rotunda, Ethical Problems in Federal Agency Hiring of 
Private Attorneys , 1 Geo. J. Legal Ethics 85, 111-116 (1987). 



CONTRACTING FOR LEGAL SERVICES 303 



public interests at stake have counselled in favor of a ^7 
concentration of authority in the Department of Justice. 

At the same time, there are several opinions by the General 
Accounting Office which discuss consulting contracts for legal 
services and classify the arrangements as non-personal. A 
"consulting" contract is one calling for services of an advisory 
nature. In one case it was found by the GAO that government 
supervision of the attorney's performance would not begrequired 
due to the lawyer's extensive knowledge of the field. In 
another, where a legal opinion was solicited regarding the scope 
of the agency's authority, the Comptroller General found that: 

. . . the [agency] requested an end product — a 
legal review of its authority and a 
determination of the extent of its 
independence from [the parent agency] — and it 
was the responsibility of the law firm to 
determine how best to achieve the desired 
goal. This necessarily required the law firm 
to perform its own research and to conduct^an 
independent "unsupervised" legal analysis. 



^^See 5 U.S.C. § 3106 (1982) and 28 U.S.C. §§ 516, 518, 519, 
547(2) (1982) and Burns Letter, quoted note 42 supra . By their 
terms these statutes forbid an agency's litigating on its own 
regardless of whether the person litigating is a full-time 
employee or otherwise. While statutory exceptions to the norm are 
contemplated, the general thrust of these statutes concentrating 
litigation in DOJ, given their policy, would seem to be to require 
clear statutory authorization for an agency's hire of outside 
counsel for litigation. (This mirrors the approach to personal 
services contracting: specific statutory authority is required. 
See text at note 63 infra. This, however, is primarily intended 
to protect the integrity of government personnel regulation. ) 

As will be noted below, however, agencies differ in the 
degree to which they view close control of private litigators 
necessary and, even within the same agency, differing degrees of 
control may be exercised depending on the nature of the case. See 
text at notes 357-80, 404-08, 430-32 infra. 

^^See, e.g. , 48 C.F.R. § 37.201 (1986). 

^^53 Comp. Gen. 702 (1974). 

^°61 Comp. Gen. 69, 73 (1981). 

See also Comptroller General's opinion in B-133381, July 22, 
1977 (unpiiblished) . In this case, the International Trade 
Commission was found by the Civil Service Commission to be in 
violation of CSC's rules as a result of its organization. The ITC 
General Counsel initiated the CSC inspection. The ITC thereafter 



304 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Viewing matters in that way suggests that many consulting 
contracts for legal services would be deemed "non-personnel." 

Where an attorney is employed in more than a purely 
"advisory" capacity, as where he or she drafts contracts, 
negotiates real estate transactions or otherwise acts on behalf of 
the government in dealing with third persons, the major decisions 
must presumably be the agency's. These instances may fall 
somewhere between contracts for litigation services and those for 



(continued from previous page) 

voted to appeal the CSC report. It contracted with two private 
attorneys to prepare a statement for submission to the CSC over 
the signature of the ITC chairman stating the views of the ITC 
regarding the CSC report and to prepare a memorandum to the ITC 
explaining the work done and items in the report which were found 
objectionable and those which were found not subject to objection. 

The Comptroller General found on the basis of the apparently 
limited information available that: 

1. the ITC had sufficiently demonstrated the need to contract 
for the services because its Office of General Counsel had 
initiated the investigation and therefore, the ITC needed an 
"independent" judgment; 

2. 5 U.S.C. § 3109 along with the ITC appropriation act was 
the grant of relevant contracting authority; 

3 . the services performed were not within the statutory 
jurisdiction of the Department of Justice; and 

4. the relationship established as a result of the contract 
was, as far as could be determined from the information available, 
not that of employer/employee, but purely contractual. 

While only the last cited finding of this Comptroller General 
opinion is relevant to the topic discussed in the text, it 
highlights the general types- of issues that must be confronted in 
dealing with any procurement problem in the legal services area. 
The topic encompassed by finding (1) is discussed in text at notes 
84-105 infra, finding (2) in text at notes 63-83 infra, and 
finding (3) in text at notes 104-05 infra. 

See Lovitky, supra note 47, at 344. But see GAO opinion in 
Matter of Navaho and Hopi Indian Relocation Commission, 
B-114868.18 (Feb. 10, 1978) (unpublished) (if attorney serves as 
general counsel, supervision necessary may create personal 
services contract). 



CONTRACTING FOR LEGAL SERVICES 305 



merely legal advice in terms of the^amount of supervision and 
control that should be called for. 

Because of the impact on the scheme of civil service 
regulation, agencies must rely on "specific" statutory 
authorization in order to justify the award of a^personal services 
contract, whether for legal services or others. This 
requirement for "specificity" may arguably be satisfied in a 
variety of ways. For example, a statute may authorize the agency 
to establish an employee/employer relationship by expressly 
empowering the agency to enter into "personal servicg" contracts. 
Such is the case with the Veterans' Administration, though the 
statute does not refer to any particular type of services, thus 
raising the question whether it encompasses legal services, or 
more specifically, the power to conduct litigation. 

Some statutes expressly empower the agencies to use private 
attorneys to conduct litigation, though they do not on their face 
classify the services to be rendered as "personal." Where it is 
contemplated by Congress that the attorneys retained under the 
authority of these provisions will be subject to close agency 
supervision and control, such statutes may also satisfy the 
requirement for "specific" statutory authorization necessary to 
exempt the hire from all or part of the scheme of 0PM g_ 
regulation. Both the 1986 Debt Collection Amendments and 
perhaps another Veterans' Administration statute may fall into 
this category. The latter provides in part: 



CO 

As with litigation, though, different types of cases may 
call for different treatment in terms of the degree of control 
exercised. 

^^48 C.F.R. § 37.104(b) (1986). Needless to say, whether a 
statute is "specific" in the relevant sense may often be a 
debatable issue. Presumably this rule mirrors the assumption that 
if Congress wants to exempt a hire from otherwise applicable 
personnel regulation, it says so clearly. 

^^38 U.S.C. § 231 (1982). 

Regarding this latter inquiry, the statutes vesting 
litigation authority in the Department of Justice "except where 
statutes otherwise provide" must be considered. See note 57 
supra . 

Of course the extent to which the hire, if it creates an 
employee/employer relationship, is subject to or partially exempt 
or fully exempt from the civil service regime is a question of 
statutory construction. See text at notes 106-17 infra. 

67 

See text at notes 246-68 infra. 



306 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



[With the concurrence of the Attorney General 
of the United States], the Administrator may 
acquire the services of attorneys, other than 
those who are employees of the Veterans ' 
Administration, to exercise [the right of the 
United States to bring suit in court to 
foreclose a loan made or acquired by the 
Administrator and to recover possession of any 
property acquired by the Administrator] . The 
activities of attorneys in bringing suit under 
this section shall be subject to the direction 
and supervision of the Attorney General and to 
such terms and conditions as the Attorney 
General may prescribe. 

Moreover Congress has enacted a statute, 5 U.S.C. § 3109, 
which permits the head of an agency to "procure by contract" the 



I 



38 U.S.C. § 1830(a) (1982) (emphasis added). Both statutes 
might be construed as grants of authority to enter into either 
personal or non-personal service contracts, within the discretion 
of the agency. 

5 U.S.C. § 3109 (1982) which provides in relevant part: 

(b) When authorized by an appropriation or 
other statute, the head of an agency may 
procure by contract the temporary (not in 
excess of 1 year) or intermittent services of 
experts or consultants or an organization 
thereof, including stenographic reporting 
services. Services procured under this 
section are without regard to — 

(1) the provisions of this title 
governing appointment in the competitive 
service; 

(2) chapter 51 and subchapter III of 
chapter 53 of this title [5 U.S.C. 

§§ 5101 et seq. , §§ 5331 et seq. ]; and 

(3) section 5 of title 41 [41 U.S.C. 

§ 5], except in the case of stenographic 
reporting services by an organization. 

However, an agency subject to chapter 51 and 
subchapter III of chapter 53 of this title [5 
U.S.C. §§ 5101 et seq. , §§ 5331 et seq. ] may 
pay a rate for services under this section in 
excess of the daily equivalent of the highest 
rate payable under section 5332 of this title 
[5 U.S.C. § 5332] only when specifically 



CONTRACTING FOR LEGAL SERVICES 307 



temporary (not in excess of one year) or intermittent personal 
services of experts and consultants or an organization thereof 
without regard to the statutes governing appointment in the 
competitive civil service. This authority is "triggered" only by 
some other statute, including an appropriation. What happens in 
practice apparently is that this other statute expressly refers to 
Section 3109. An example is the Department of Defense 1983 
Continuing Appropriations Act which provided in part: 

During the current fiscal year, the Secretary 
of Defense and the Secretaries of the Army, 
Navy, and Air Force, respectively, if they 
should deem it advantageous to the national 
defense, and if in their opinions the existing 
facilities of the Department of Defense, are 
inadequate, are authorized to procure services 
in accordance with Section 3109 of title 5, 
United States Code, under regulations 
prescribed by the Secretary of Defense 

The Comptroller General has interpreted Section^3109 to 
authorize appointment to the excepted civil service, though in 
accordance with the procedural formalities applicable to civil 
service appointments. The authority is limited to the services 
of "consultants" and "experts," but contemplates that the 
persons or organizations retained can perform work of a type 



(continued from previous page) 

authorized by an appropriation or other 
statute authorizing the procurement of the 
services. 

(c) Positions in the Senior Executive Service 
may not be filled under the authority of 
subsection (b) of this section. 

^°Pub. L. No. 97-377, sec. 703, 96 Stat. 1830, 1849. 

71 

Lovitky, supra note 47, at 333. 

^^Id. at 334. See generally FEDERAL PERSONNEL MANUAL, Chap. 
304, Employment of Individual Experts and Consultants. 

73 

Consultants function in a purely advisory capacity. 

Lovitky, supra note 47, at 336. See also 48 C.F.R. § 37.201 

(1985). 

^^"Experts" are utilized in a primarily operational capacity. 
Lovitky, supra note 47, at 336. 



308 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



75 
normally provided by persons m the regular civil service. 

Agreements calling for the performance of personal services by 

consultants may, therefore, be obtained under the authority of^^ 

Section 3109 in conjunction with a specific appropriation act. 

The FAR itself expressly acknowledges that Section 3109 
qualifies as-a statutory authorization for personal service 
contracting. Therefore, it would seem that where an attorney 
will function as an "expert" or "consultant" within the meaning of 
Section 3109 in furnishing legal services to an agency, the 
classification of the contractual relationship as "personal" will 
not necessarily be fatal where there is the requisite 
appropriation or other statutory authorization which triggers 
Section 3109. This assumes, of course, that the particular 
appropriation or other statute can be construed to encompass 
services of a legal nature. 

Where the legal services at issue are deemed "non-personal," 
the agency can rel^gOn "general contracting authority" to justify 
their procurement. In this regard it should be noted that 
Section 3109 has also been interpreted as a statutory grant of 
authority to secure services (including legal services) by 
"contrac;^gOr appointment" where the triggering appropriation is 
present. However, in this contextgit is also limited to the 
services of experts and consultants. 

Where contracting authority, whether general or specific, is 
present, a finding that a contract is "non-personal" means that 
the firm or individual retained is deemed to be an "independent 
contractor. " 

Finally, it is worth noting that a statutory grant of 
contracting authority may not be required, at least in all 
instances, to justify the retention of attorneys, whether as 
consultants, experts or otherwise, where they function as 
independent contractors. The courts have recognized the inherent 



^^Id. at 333-4. 

^^Id. at 334. 

^^48 C.F.R. § 37.104(b)" (1986). 

^^Id. § 37.102(d). 

Boyle V. United States, 309 F.2d 399, 401 (Ct, 

CI. 1962). See also 61 Comp . Gen. 69 (1981); GAO opinion in 
Matter of Navaho and Hopi Indian Relocation Commission, 
B-114868.18 (Feb. 10, 1978) (unpublished). 

®°See 5 U.S.C. § 3109 (1982). 

81 

See 61 Comp. Gen. 69 (1981). 



CONTRACTING FOR LEGAL SERVICES 309 



power of the executivegbranch of government to enter into 
procurement contracts, though presumably Congress couldg^t least 
to some degree limit this authority if it did so clearly. 

B. Standard for Procurement 

Where a contract is classified as calling for personal 
services, the specific statutory authority required to justify the 
procurement must initially be consulted to ascertain the standard 
(if any) to be applied in determining when the ag|ncy can retain 
attorneys as experts, consultants, or otherwise. Moreover, 
where personal consulting services are involved, the Federal 
Acquisition Regulation specifies that an agency ggy contract for 
them only "when essential to the agency's mission" and the 
services may "not unnecessarily duplicate any previously performed 
work or services." 

With respect to non-personal services, examination of any 
relevant statutory authority for the contracting would similarly 
be called for. As in the case of personnel servicgg, any agency 
developed standards must be consistent with these. But even 
without statutory guidance, the FAR mandates that the agency 
consider the "relative costs of Government and contract gg 
performance . . . where Government performance is practicable." 
"In no event may a contract be awarded for the performance of an 
inherently governmental function." With respect to non-personal 



Lovitky, supra note 47, at 339. See , e.g. , United States 
V. Tingey, 30 U.S. (5 Pet.) 115, 127 (1831); United States v. 
Salon, 182 F.2d 110, 112 (7th Cir. 1950); United States v. 
Maurice, 36 F. Cas . 1211, 1216-17 (No. 15747) (C.C.D. Va. 1823). 

^^Cf . Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 582, 
635-38 (1951) (Jackson, J., concurring). 

84 

See, e.g. , text at note 70 supra . 

®^48 C.F.R. Parts 1-51 (1985). See text at notes 186-94 



infra. 
86 



48 C.F.R. § 37.204(b) (1986) (emphasis added). 

^"^Id. § 205(b)(1). 
88, 



See, e.g. , text at note 331 infra. 

^8 C.F.R. § 37.102(c) (1986). Thi 
personal service contracting. See generally id. § 37.102 

^°Id, § 37 
states in part: 



®^48 C.F.R. § 37.102(c) (1986). This seems to apply also to 
^^Id. § 37.102(b). 0MB Circular No. A-76 (Rev. Aug. 4, 1983) 



310 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 
consulting services, the FAR imposes the same acquisition 



(continued from previous page) 

b. Retain Governmental Functions 
In-House . Certain functions are inherently 
Governmental in nature, being so intimately 
related to the public interest as to mandate 
performance only by Federal employees. These 
functions are not in competition with the 
commercial sector. Therefore, these functions 
shall be performed by Government employees. 



e. A Governmental function is a function 
which is so intimately related to the public 
interest as to mandate performance by 
Government employees. These functions include 
those activities which require either the 
exercise of discretion in applying Government 
authority or the use of value judgment in 
making decisions for the Government. Services 
or products in support of Governmental 
functions, such as those listed in Attachment 
A, are commercial activities and are normally 
subject to this Circular. Governmental 
functions normally fall into two categories: 

(1) The act of governing ; i.e., the 
discretionary exercise of Government 
authority. Examples include criminal 
investigations, prosecutions and other 
judicial functions; management of 
Government programs requiring value 
judgments, as in direction of the 
national defense; management and 
direction of the Armed Services, 
activities performed exclusively by 
military personnel who are subject to 
deployment in a combat, combat support or 
combat service support role; conduct of 
foreign relations; selection of program 
priorities; direction of Federal 
employees; regulation of the use of 
space, oceans, navigable rivers and other 
natural resources; direction of 
intelligence and counter-intelligence 
operations; and regulation of industry 
and commerce, including food and drugs. 



(2) Monetary transactions and 
entitlements, such as tax collection and 



CONTRACTING FOR LEGAL SERVICES 3 1 



standards as it does in the case of personal consulting 
contracts . 

The General Accounting Office has indicated that, where 
Congress has not provided otherwise, with regard to legal services 
of a non-personal nature the agency must determine that 
contracting out is "more feasible, more econgmical, or necessary 
to the accomplishment of the agency's task." "Thus, where an 
agency has employees available, whether attorneys or not, to 
perform a particular task, it should not contract for performance 
of the same task. Each agency is responsible for determining in 
each case, whethergthe particular services could be performed by 
agency employees . " 

In one case the agency retained an attorney to provide legal 
assistance necessary to an appeal because its General Counsel ' s 
Office had previously advocated the opposing position. The 
Comptroller General determined that in thgge circumstances a 
sufficient showing of need had been made. The same result 
obtained in another case where an advisory commission used a law 
firm to research the parameters of its legal authority after its 
parent agency had offered its own opinion on the same subject. 
Specifically, that later opinion related to the extent of the 
contracting agency's independence from the parent agency. An 
alleged conflict of interest tainted ^^e first opinion and 
justified a request for another view. 



(continued from previous page) 

revenue disbursements; control of the 
treasury accounts and money supply; and 
the administration of public trusts. 

Arguably certain legal services, including litigation of some 
types, might fit this description in certain circumstances, though 
Attachment A to the Circular does include a category, 
"legal/litigation studies." 

^■"■48 C.F.R. § 37.204(b) (1986). See text at notes 86-87 
supra . 

^^ See 61 Comp. Gen. 69 (citing earlier opinions) (consulting 
services at issue here). 

^^GAO opinion in B-133381, July 22, 1977 (unpublished). 

94 

Id. See note 60 supra . 

^^ See 61 Comp. Gen. 69. The Comptroller General there 
reiterated its opinion, expressed on other occasions, that the pay 
limits found in 5 U.S. C. § 3109(b), see note 69, supra , applied 



312 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



When it comes to consulting services, whether of a personal 
or non-personal nature, the FAR permits contracts to obtain, for 
example, "specialized opinions or professional or technical advice 
not available within the agency or from another agency" and 
"outside points of-view, to avoid too limited a judgment on 
critical issues." Agencies may not, however, contract for 
consulting services where the contracts involve the performance of 
"work of a policy-making, decision-making, or managerial^nature 
that is the direct responsibility of agency officials," will 
"bypass or undermine personnel ceilings, pay limitations, or 
competitive employment procedures," .."specifically aid in 
influencing or enacting legislation," or^afford "preferential 
treatment to former Government employees." While such 
activities are forbidden for "consulting contracts," it is not 
clear whether classification of a contract as other than one for 
consulting services may avoid some of these restrictions, as for 
example, if the contract could be^considered one for "expert" 
services under 5 U.S.C. § 3109. 

Finally, it should be noted that even where there is apparent 
authority to enter into a services contract, whether personal or 
non-personal and whether for consulting or other services, and a 
sufficient showing of need for the services can be made, there may 
be other statutes that have to be examined in order to determine 
whether Congress has in fact forbidden the contracting out 
attempted. Examples of such statutes are the various 



I 



(continued from previous page) 

only to consultants serving by appointment and not as independent 
contractors. Id. at 77. 

^^48 C.F.R. § 37.204(b)(1) (1986). 

97 

Id. § 37.204(b)(2). 

^^Id. § 37.204(c)(1). 

99 

Id. § 37.204(c)(2). 

•^^^Id. § 37.204(c)(3). 

-'•^-^Id. § 37.204(c)(4). 

■^°^Such as id^ § (c)(1). 

103 

See note 69 supra . 

104 

See, e.g. , 61 Comp. Gen. 69, 73-4 (1981). 



CONTRACTING FOR LEGAL SERVICES 313 



provisions in the United States Code which largely reserve the 
power to litigate on behalf of the United States to the Department 
of Justice. 

C. Procurement Procedures 

1, The Personal/Non-Personal Distinction 

Since personal services contracts must be based on "specific" 
statutory authorization, such authorizing legislation must 
initially be consulted in order to determine what procedures and 
restrictions, if any. Congress intended to accompany obtaining of 
the services. 

Several examples are of particular interest here. The 
Federal Election Commission is authorized to "^ppoint" counsel to 
represent it in certain types of litigation. Such appointments 
are "without regard to the provisions of title 5, United States 
Code, governing appointments in the competitive service" and the 
compensation may be fixed "without regard to the provisions^gj 
chapter 51 and subchapter III of Chapter 53 of such title," 
The Comptroller General may apply to the district courts to 
enforce its subpoenas "by counsel whom he may employ without 
regard to the provisions of title 5 governing appointments in the 
competitive service, and the provisions of chapter 51 and 
subchapters III and IV of Chapter 53 of such tiJJ|, relating to 
classification and General Schedule pay rates." A final 
example is Section 3109 of Title 5 which authorizes the 
appointment of legal consultants "without regard to . . . the 
provisions of this title governing appointment in the competitive 
service . . . [and] chapter 51 and sxibchapter II of chj^ger 53 of 
the title" but subject to certain compensation limits. 

Where a statute uses the term "appointment," the position may 
likely fall within the regulatory jurisdiction of the 0PM. Such 
is apparently the case with regard to FEC counsel. The grant of 
authority to the Comptroller General is similar. On the other 
hand. Section 3109 of Title 5 uses the phrase, "procure by 



■'■^^See 5 U.S.C. § 3106, 28 U.S.C. §§ 516, 518(b), 519, 547(2) 



(1982). 

106 



See text at note 63 supra . 



•^°^26 U.S.C. § 9010 (1982). See also id. § 9040; 2 U.S.C 
§ 437c(f )(4)(B) (1982). 

26 U.S.C. § 9010(a) (1982). 
109 



42 U.S.C. § 1320a-4(b) (1982). 

^5 U.S.C 
note 47, at 338 



-^■^^5 U.S.C. § 3109(b) (1982). See generally Lovitky, supra 



314 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



contract" which on first glance suggests that the experts and 
consultants retained are to be independent contractors. However 
the fact that by the terms of Section 3109 such contracts are 
exempt from both certain civil service provisions and from 
procurement advertising requirements has been relied upon to 
support an interpretation of this statute as a grant of both 
appointment and procurement authority, ni^^ former subject to 
OPM and the latter to OFPP jurisdiction. With regard to the 
1986 Debt Collection Amendments, and perhaps the^similar Veterans' 
Administration authority referred to previously, it could be 
argued that while Congress intended that supervision should be 
close, even to the point of creating what otherwise could be 
considered a personal services contract, the contracts were to be 
considered subject only to the procurement regime. 
Alternatively Congress may have assumed that the contracts would 
be subject to both OPM and OFPP regulations to some degree. (Or 
Congress may never have considered the potential for OPM 
jurisdiction. ) 

Outside of those instances where statutes indicate that the 
hire is subject exclusively to civil service or other regulation, 
personal service contracting would seem to be subject to the 
requirements of the Competition in Contracting Act or to both that 
statute and some regulation by the OPM. The FAR expressly 



-'■■^■'■5 U.S.C. § 3109(b)(1), (2). 
^^^Id. (b)(3). 

See Lovitky, supra note 47, at 333-4. 
-'--'-'^Id. at 334, 337-8. 

See text at notes 67-68 supra . 

Under these two statutes, if they authorize "personal 
service" contracts, it is a "nice" question whose employees the 
attorneys would be: Justice's or the agency relying on the 
collection services. 

See also 15 U.S.C. § 634(b)(7) (SBA power to procure attorney 
services by contract for loans); 39 U.S.C. § 409(d) (With prior 
consent of the Attorney General, the Postal Service may employ 
attorneys by "contract or otherwise to conduct litigation 
. . . .") (emphasis added) (This may be a grant of both 
appointment and procurement authority.); 42 U.S.C. § 3211 
(Secretary of Commerce may procure attorney services by contract 
for loans ) . 

The Office of Personnel Management has adopted a set of 
instructions applicable to the retention of experts and 
consultants in positions excepted from the competitive service by 
statute or by the OPM. FEDERAL PERSONNEL MANUAL , chap. 304. 



CONTRACTING FOR LEGAL SERVICES 315 



contemplates that the competition requirements which it lays down, 
which to a great extent mirror the CICA, apply to all services 



(continued from previous page) 

These apply to appointments under, inter alia, 5 U.S.C. § 3109. 
They also apply to individual expert or consultant services 
procured by contract if an employer-employee rather than an 
independent contractor relationship is created. Id. l-l(a). 

An agency considering hiring an expert or consultant would 
obviously be concerned with the restraints and conditions thus 
imposed. They may suggest that structuring the contractual 
relationship with the service provider as that of an independent 
contractor is the preferable course to take. 

It may, therefore, be helpful to summarize the significant 
parts of these instructions: 

1. "Intermittent appointments can be renewed from year to 
year . . . temporary appointments cannot," though there are 
exceptions. Id. 1-3 (c). 

2. "While persons appointed under . . . Section 3109 are 
excepted from the position classification and General Schedule 
grade and pay laws, section 3109 states that agencies otherwise 
subject to those laws generally may pay up to the daily equivalent 
of the highest rate payable under the General Schedule; . . . that 
rate is limited to the rate payable for level V of the Executive 
Schedule. The Comptroller General has held that highest rate 
payable is the top step of grade GS-15." Id. 1-6 (a). 

3 . "Because experts and consultants generally are paid on a 
daily rate basis, they are not entitled to more than the daily 
rate prescribed in the appointment documents for each day of 
service regardless of the number of hours worked." However, "an 
expert or consultant, employed on a daily basis may be paid the 
rate of basic compensation for work on days outside the prescribed 
tour of duty, provided compensation within any biweekly pay period 
does not exceed the rate of basic pay for level V of the Executive 
Schedule." Id. l-6(e). 

4. Experts and consultants hired as employees are employees 
within the coverage of the Fair Labor Standards Act, though most 
experts and consultants are exempt from the minimum wage and 
overtime pay provisions. Id. l-6(f). 

5. Unless the hiring agency otherwise provides, an expert or 
consultant is not entitled to a pay increase on the basis of an 
increase in the General Schedule. Id. l-6(g). 

6. "Unless the appointment documents expressly provide for 
holiday pay, an expert or consultant employed on a per diem basis 



316 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 
contracts, whether personal or nonpersonal, unless a statute 



(continued from previous page) 

is not entitled to compensation for holidays on which no work is 
performed." Id^ l-6(h). 

7. "Certain former members of the uniformed services are 
subject to reduction in retired pay if employed in the Federal 
service." Id^ 1-6(2 )(i). 

8. "An expert or consultant who serves intermittently may be 
allowed travel or transportation expenses." Id. l-6(k). 

9 . "An expert or consultant . . . who serves on an 
intermittent or other basis without a prearranged regular tour of 
duty does not earn annual and sick leave [but one who is on] a 
regularly prescribed tour of duty does earn such leave." Id. 
l-7(a). 

10. "An expert or consultant whose service is intermittent 
or temporary for one year or less is not covered under the civil 
service retirement system and is ineligible for life insurance and 
health benefits." Id^ 1-7 (b). 

11. Statutory prohibitions on conflict of interest apply to 
many experts or consultants as "special government employees." 

Id. 1-9. See also FEDERAL PERSONNEL MANUAL Chap. 735, Appendix C. 

12. "Experts and consultants who serve as employees are 
subject to the same conditions and restrictions which apply to 
other Federal employees who are in the excepted service and who 
work on a temporary or intermittent basis." Chap. 304, l-lO(a). 

13. "Each proposed appointment (and extension of 
appointment) must be reviewed and certified by a high agency 
management official in terms of," inter alia, the need for the 
position, the correctness of judgment that the position requires 
an expert or consultant, the qualifications of the proposed 
appointee, and the appropriateness of the intended level of pay. 
Id. Appendix A, A-l(a), 

14. A suitable certification attesting that all the 
requirements listed in item 13 have been met must be prepared and 
signed by the certifying official- Id. A-l(c). 

15. "Agencies are required to maintain effective controls 
over use of appointees during employment." Such control includes 
frequent reviews, generally quarterly, to assure that in each case 
the duties performed are still those of an expert or consultant, 
time limits are being observed, documentation is kept current, and 
duties of records are actually being performed. Id. A-2(a). 



CONTRACTING FOR LEGAL SERVICES 317 



118 
Otherwise requires. Moreover, the CICA applies by its terms to 

contracting for "services" and makes no express distinction 

between personal and non-personal services. In fact, there is 



(continued from previous page) 

16. Each quarterly review is to be documented and the record 
retained for 0PM examination. Id. A-2(c). 

17. "For each expert or consultant employed, full-time or 
part-time or intermittently, whether employed by appointment or by 
contract, . . . each agency must establish an Official Personnel 
Folder" to contain designated documents, including a description 
of the position, a description of the appointee's background and 
qualifications, a Standard Form notification of personnel action 
showing the employment, and a standard form showing termination of 
the employment, a certification that a statement of employment and 
financial interests has been obtained and it had been determined 
that no conflict of interest exists. Id. A-4(a). 

18. The agency should obtain form each expert and consultant 
a statement of employment and financial interests at the time of 
formal employment. Id. A-4(b). 

19. Employing agencies must report their employment actions 
to 0PM on designated forms. Id. A-5. 

Some expert and consultant contracts may be subject to 
regulation by both the OMP and OFPP. See id_^ chap. 304, 1-10. 
Attorneys .providing other than expert or consultant se2rvices but 
still considered "employees" may be subject in part to 
restrictions similar to those detailed above or others within the 
jurisdiction of the 0PM. It should be noted, however, that even 
full-time attorney positions are exempt from important parts of 
the civil service regime, most importantly the competitive 
examination system and many of the tenure protection provisions. 

-^-•■^48 C.F.R. § 37.105 (1986). 

•^•^^See 41 U.S.C. § 253(a)(1). Technically, the 1984 CICA was 
an amendment to the Federal Property and Administrative Services 
Act of 1949. See Pub. L. 98-369, § 2711(a)(1), 98 Stat. 1175. 
The declaration of purpose of the latter statute indicated an 
intent to encompass only "non-personal" services, see 40 U.S.C. 
§ 471(a), which it defined as "contractual services, other than 
personal and professional services." See 40 U.S.C. § 472(j). See 
also 40 U.S.C. § 481(a)(1). This gives rise to an argument that 
the CICA is limited to "non-personal" services and apparently some 
officials so view it. 

Other officials do not agree, as is evidenced by the FAR, and 
they would seem to stand on higher ground on this issue. The CICA 
refers to "services" generally. It would be an odd bit of 



318 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



no reason inherent in the distinction between personal and 
non-personal service contracts that requires a finding that they 
should be treated differently with regard to competitive 
procedures. 

Prior to the 1984 Act, the GAO had clearly indicated that 
procurement of non-personal services pursuant to Section 3109 was 
subject to general federal procurement regulations. Nothing in 
the CICA expressly changes that result. 

2. Legal Services 

The Competition in Contracting Act of 1984 applies to 
"services," without any distinction as to type, such as 
professional or non-professional, attorney or accountant. In 
fact Section 2753 of the Act mandated a study and the 
development of recommendations regarding how to "increase the 
opportunities to achieve full and open competition on the basis of 
technical qualifications, quality, and other factors in the 
procurement29f professional , technical, and management 
services." This provision suggests that the drafters of the 
Act intended that it apply to professional services, which 
attorneys services clearly are. 



(continued from previous page) 

drafting to define "non-personal services" at one point and intend 
that any time the term "services" is used it is meant to refer to 
"non-personal services." Such drafting would directly undermine 
the usefulness of a definitional section. In fact, prior to CICA, 
the Federal Property and Administrative Services Act contained an 
exemption from its advertising requirements for "personal or 
professional services," see 41 U.S. C. § 252(c)(4) (1982), which 
exemption was not continued in express terms by the CICA. 

•^^^ See 61 Comp. Gen. 69, 78-9 (1981) (citing prior opinions). 
This opinion dealt with legal services. See also Lovitky, supra 
note 47, at 338-9. 

■^^-^41 U.S.C. § 253(a)(1). 

122 

See also note 119 supra . 

■'■^"^P.L. 98-369, sec. 2753, 98 Stat. 1203. 

124 

Id. (emphasis added). 

125 

The Conference Committee noted: 

The conference substitute requires the 
Office of Federal Procurement Policy to 
recommend to Congress a plan for increasing 
the use of full and open competition in the 



CONTRACTING FOR LEGAL SERVICES 319 



(continued from previous page) 

procurement of professional, technical and 
managerial services. This category of 
procurements often involves the use of 
evaluation criteria, other than price, in the 
selection of the winning vendor. 

The Office of Federal Procurement Policy 
is directed to recommend competitive selection 
procedures for procurements where price is not 
a significant factor and the agency has 
determined a legitimate need for the best or 
highest quality proposal. Such a plan should 
include requirements for the agencies to 
follow to ensure that all responsible vendors 
are allowed to compete for the above 
procurements and that fair and reasonable 
prices are paid for the service. OFPP should 
consider, as a possible alternative prior to 
designing a plan, a system in which all 
qualified persons capable of providing 
specified services are placed on a list 
maintained by the government, in which each of 
those persons is encouraged to submit a 
competitive proposal in response to each 
solicitation for such services, and in which 
the award is made to the bidder on the list 
who can perform the service for the lowest 
overall cost. 

The Office of Federal Procurement Policy 
should also, in conducting the study, consult 
with experts in such fields as soil 
engineering, real estate appraising, surveying 
and mapping, and other professional services 
which do not fit within the traditional 
concept of Federal procurement procedures. 

Deficit Reduction Act of 1984, H. Rep. 98-861, 98th Cong., 2d 
Sess. at 1438 (1984). See also H. Rep. 98-1157, 98th Cong. 2d. 
Sess. at 28 (1984). 

These Reports demonstrate that Congress in 1984 realized that 
in obtaining professional services price should not always be the 
sole basis for choice but that the problems in obtaining such 
services on a competitive basis might justify special procurement 
procedures . 



320 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Moreover, given the concerns underlying the legislation 
there is no reason to think that Congress in 1984 intended to 
exempt legal services from the purview of CICA. Nothing in the 
legislative history expressly supports such an exemption. In 
fact, in passing the Debt Collection Amendments of 1986, Congress 
expressed its view that the CICA, applied to attorneys services, at 
least in the litigation context. If it applies there, it is 
difficult to believe that Congress would distinguish between 
litigation and non-litigation services with regard to procurement 
procedures. 

Finally, prior to the enactment of the CICA, the GAO clearly 
found that at least in the context of non-personal attorney 
consulting contracts entered into pursuant to S^U-S.C. Section 
3109, federal procurement requirements applied. 

Thus where there is a contract for services, the 
applicability of the CICA is not affected by the fact that it is 
attorney services which are being procured, at least where public 
funds are used to pay the bills. Where any attorneys retained 



1 9 ft 

See note 130 infra and text at note 135 infra. 

127 

See text at notes 278-92 infra. 

128 

61 Comp. Gen. 69, 78-79 (1981). See generally Lovitky, 
supra note 47, at 338-9. 

Prior to the 1984 Act, professional services contracts, 
including those under § 3109, were exempt from advertising. See 5 
U.S.C. § 3109(b)(3) (1982); 41 U.S.C. § 5 (1982); 41 U.S.C. 
§ 252(c)(4) (1982). After the 1984 Act the advertising 
requirements of Section 5 do "not apply to the procurement of 
property or services [made] by an executive agency pursuant to 
this subchapter [the CICA]." 41 U.S.C. § 260 (1982). That legal 
services may be exempt from advertising under 41 U.S.C. § 5 (as 
amended in 1983) as professional services does not, however, 
establish that they are exempt from the CICA. Exemptions from the 
latter must be "express." See 41 U.S.C. § 253(a)(1) (Supp. Ill 
1985). 

The 1984 Act further provides that "[a]ny provision of law 
which authorizes an executive agency ... to procure any property 
or services without advertising or without regard to said section 
5 of this title shall be construed to authorize the procurement of 
such property or services pursuant to the provisions of this 
chapter relating to procedures other than sealed-bid procedures." 
41 U.S.C. § 260 (Supp. Ill 1985). This provision has obvious 
reference to 5 U.S.C. § 3109, see id. § 3109(b)(3), and arguably 
confirms the continued viability of 61 Comp. Gen. at 78-79. 



CONTRACTING FOR LEGAL SERVICES 321 



129 
will be paid from non-appropriated funds, it might be argued 

that at least some of the concerns prompting the passage of the 

Act ar^^not implicated and the agency need not comply with the 

CICA. Since, however, the possibility of favoritism is present 

even where public funds are not at stake and such favoritism 

impacts adversely the public's view of its government, there are 

some good reasons not to construe the statute so restrictively. 

In fact the construction of the CICA as applicable to 

non-appropriated funds is supported by the fact that in enacting 

the 1986 Debt Collection Amendments Congress indicated both that 

CICA applied to the contracting for legal services there 

authorized and that contingency fees (i.e. non- appropriated^ funds ) 

would be the usual mode of payment for attorneys retained. 

132 
3 . Competition in Contracting Act 

In 1984 Congress amended^the Federal Property and 
Administrative Services Act and the Armed Services Procurement 
Act. It had determined that two of their principal 
shortcomings were their failure to "give proper accordance to 



129 

As m the case of the Federal Deposit Insurance 

Corporation. See text at notes 336-38 infra. 

See, e.g. , Sen. Rep. No. 98-297, 98th Cong. 1st Sess. at 3 
(1983): "The last, and possibly the most important, benefit of 
competition is its inherit appeal of 'fair play.' Competition 
maintains the integrity in the expenditure of public funds by 
ensuring that government contracts are awarded on the basis of 
merit rather than favoritism." (emphasis added.) 

By its terms the FAR applies only to the use of appropriated 
funds. See 48 C.F.R. §§ 1.103, 2.101 (1986). This may, however, 
merely reflect the fact that the statutory procurement counterpart 
to the CICA in the defense area is made expressly applicable only 
to services "for which payment is to be made from appropriated 
funds." 10 U.S.C. § 2303(a) (Supp. Ill 1985). It is significant 
that the CICA lacks such a provision. 

See text at notes 234-40 and 278-87 infra (though, of 
course, the loans recovered here may have originally come from 
appropriated funds). However, payment of expenses of suit such as 
filing fees will apparently come out of appropriated funds. See 
Legal Times, Vol. IX, No. 36, Mon. , Feb. 16, 1987 at 1 ("Private 
Lawyers See Riches in Federal Debt Collection" ) . 

■•■^^Pub. L. 98-369; 98 Stat. 1175, July 18, 1984. 

■^^"^41 U.S.C. §§ 251 et seq. (1982). 

134 

10 U.S.C. § 2301 et seq. (1982). 



322 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



negotiation as a legitimate competitive procurement procedure" and 
to "adequately restrict the use of noncompetitive negotiation." 

The focus of the following discussion of the new requirements 
applicable to procurement, which were adopted to solve these 
problems, is on procurement in the civilian, sector, though similar 
procedures apply to military procurement. Even here, there are 
some provisions of the CICA which appear largely irrelevant to 
procurement of attorneys services or whose application in that 
context is likely to be rare. Such provisions will not be 
discussed. Moreover, the analysis will attempt to give a general 
overview of the statute, rather than probe its subtleties. 

Exje^t as otherwise expressly authorized by another 
statute or by various provisions contained in the CICA 



135 

See , e.g. , H. Rep. 98-861, 98th Cong. 2d Sess. at 1421 

(1984). See generally Cohen, The Competition in Contracting Act, 

14 Pub. Cont. L.J. 1 (1983). 

■^"^^See 10 U.S.C. §§ 2301 et seq. (Supp. Ill 1985). 

•'•^^See, e.g. , 41 U.S.C. § 253b(f) (Supp. Ill 1985) (planning 
solicitation for award of a development contract for a major 
system) . 

138 

See, e.g. , id. § 253d (delivery of technical data). 

139 

Section 252(a) mandates that "executive agencies" make 

contracts for services in accordance with Sections 251 et seq. 

See 41 U.S.C. § 252(a) (1982). It provides, however, that those 

sections do not apply "when this chapter is made inapplicable 

pursuant to section 474 of Title 40 or any other law." Id. See 

also Andrus v. Glover Const. Co., 100 S. Ct. 1905, 1911 n.l9 

(1981) (reading § 252(a)(2) "to refer exclusively to statutory 

provisions that ... in express terms exempt procurements from 

§§ 251 through 260 of Title 41 or from the FPASA in its 

entirety.") Section 253(a)(1) basically reiterates this by 

specifying, inter alia, that "except in the case of procurement 

procedures otherwise expressly authorized by statute," executive 

agencies must procure services through "full and open 

competition." Id^ § 253(a)(1) (Supp. Ill 1985). In short, in the 

civilian procurement area, the competitive scheme of the CICA 

applies unless another statutory clearly provides otherwise. 

Section 252(a) further indicates that when the CICA "is made 
inapplicable by any such provision, section 5 ... of this title 
[41 U.S.C. § 5 which requires advertising for proposals] shall be 
applicable in the absence of authority conferred by statute to 
procure without advertising or without regard to said section 5 of 
this title." 41 U.S.C. § 252(a)(2) (1982). One of the statutes 
referred to in the last clause of Section 252(a)(2) is 5 U.S.C. 
§ 3109 (Supp. Ill 1985). See note 69 supra for the full text of 



CONTRACTING FOR LEGAL SERVICES 323 

itself, -^"^^ executive agencies-^^-"- conducting a procurement for 



(continued from previous page) 

the latter provision. However, Section 260 of the CICA further 
provides : 

Sections 5, 8 and 13 of this title shall 
not apply to the procurement of property or 
services made by an executive agency pursuant 
to this chapter. Any provisions of law which 
authorize an executive agency (other than an 
executive agency which is exempted from the 
provisions of this chapter by section 252(a) 
of this title), to procure any property or 
services without advertising or without regard 
to said section 5 of this title shall be 
construed to authorize the procurement of such 
property or services pursuant to the 
provisions of this chapter relating to the 
procedures other than sealed-bid procedures. 

41 U.S. C. § 260 (Supp. Ill 1985). The last sentence of Section 
260 thus clearly indicates that when 5 U.S.C. § 3109 is relied 
upon as a source of procurement (not appointment) authority, the 
competitive procurement procedures of the CICA may ("shall be 
construed to authorize," not require) be followed. Moreover since 
Section 3109 purports to be merely an exemption from 41 U.S.C. § 5 
and not from §§ 251 et seq. , procurement of services under Section 
3109 is subject to the CICA. 

In short unless a statute otherwise provides, CICA applies in 
the civilian sector to the procurement of services. Where a 
statute clearly makes CICA inapplicable, procurement of services 
is subject to the advertising requirements of 41 U.S.C. 
§ 5 — unless there is a statutory exception to that provision. 
Section 3109 is a statutory exception to § 5 but not §§ 251 et 
seq. 

^^°See, e.g. , 41 U.S.C. § 253(b), (c), (g) (Supp. Ill 1985). 

■'■'^■^See 41 U.S.C. § 252(a) (1982). The term, "executive 
agency" ii~~not defined in Section 259 of the Act which is the 
definitional provision. See 41 U.S.C. § 259 (Supp. Ill 1985). It 
is, however, defined in 40 U.S.C. § 472 and that definition has 
been taken to be applicable to the competition provisions. See , 
e.g. , Flight International Group, Inc. v. Federal Reserve Bank of 
Chicago, 583 F. Supp. 674, 679-80 (N.D. Ga. 1984). 



Section 472(a) provides that the term "executive agency" 
means "any executive department or independent establishment in 
the executive branch of the government, including any wholly owned 



324 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



14? 

services are required to "obtain full and open competition" and 
"use the competitive procedure or combination of competitive 
procedures that^is best suited under the circumstances of the 
procurement." The term, "full and open competition," means 



i 



(continued from previous page) 

government corporation." 40 U.S. C. § 472(a) (1982). The FAR is 
in accord. See 48 C.F.R. § 2.101 ("executive department, military 
department, or any independent establishment within the meaning of 
5 U.S.C. §§ 101, 102 and 104(1), respectively, and any wholly 
owned Government corporation within the meaning of 31 U.S.C. § 846 
(sic § 9101)."). See also 41 U.S.C. § 403(1) (Supp. Ill 1985). 

The executive departments are defined in 5 U.S.C. § 101 
(1982) to include State, Treasury, Defense, Justice, Interior, 
Agriculture, Commerce, Labor, Health and Human Services, Housing 
and Urban Development, Transportation, Energy and Education. 
[However, the Department of Defense, the Coast Guard, and the 
National Aeronautics and Space Administration are expressly exempt 
from 41 U.S.C. §§ 252 et seq. though similar procurement 
provisions apply to them under 10 U.S.C. §§ 2301 et seq. ] Under 5 
U.S.C. § 104 (1982), an "independent establishment" is "an 
establishment in the executive branch (other than the United 
States Postal Service or the Postal Rate Commission) which is not 
an Executive department, military department. Government 
corporation, or part thereof, or part of an independent 
establishment" and the GAO. But see Flight International Group, 
Inc. V. Federal Reserve Bank of Chicago, 583 F. Supp. at 679 n.4 
(rejecting that the meaning of "independ^it establishment" in 
Section 472(a) necessarily is defined by 5 U.S.C. § 104). A 
"government corporation" is a corporation owned or controlled by 
the government of the United States. 5 U.S.C. § 103 (1982). The 
distinction between a "mixed-ownership Government corporation" and 
"a wholly owned Government corporation" is drawn in 31 U.S.C. 
§ 9101 (1982) by a specific identification of which government 
corporations fall into these two categories. For example, the 
FDIC and Federal Home Loan Banks, the National Credit Union 
Administration Central Liquidity Facility are designated as "mixed 
ownership." The FSLIC and Pension Benefit Guaranty Corporation 
are "wholly owned." 

Significantly for present purposes, it would therefore appear 
that except to the extent statutes otherwise provide, the 
so-called "independent agencies," such on the FTC, and the wholly 
owned government corporations, like the FSLIC and PBGC, are 
subject to the CICA, at least with regard to certain of their 
functions . 

142 

■^^'^41 U.S.C. § 253(a)(1)(A) (Supp. Ill 1985). 

143 

Id. § 253(a)(1)(B). Congress has indicated that "a fair 

proportion of the total purchases and contracts for property and 



CONTRACTING FOR LEGAL SERVICES 325 



that all responsible sources aj| permitted to submit competitive 
proposals on the procurement. 

While sealed bids constitute one type of competitive -^^^ 
procedure sanctioned (and sometimes required) by the statute, 
it is probably not required in the case of procurement of 
attorneys services since in most, if not all instances, such 
contracts will not be m|de solely on the basis of price and other 
price-related factors. Therefore a request for competitive 
proposals (RC|4 will be the requisite method of competitive 
procurement."^ 

The statute provides seven general exceptions from the 
requirements of full and open competition and use of competitive 
procedures. Three appear to be of more than passing relevance 
with regard to legal services contracts: 

(1) the property or services needed by the 

executive agency are available from only 



(continued from previous page) 

services for the Government shall be placed with small-business 
concerns." 41 U.S. C. § 252(b) (Supp. Ill 1985). "Competitive 
procedures" within the meaning of the CICA include "procurements 
conducted in furtherance of . . . . 15 U.S. C. § 644 ... as long 
as all responsible business concerns that are entitled to submit 
offers for such procurements are permitted to compete." 41 U.S.C. 
§ 259(b)(4) (Supp. Ill 1985). Finally, the CICA expressly 
provides that an "executive agency may provide for the procurement 
of property or services covered by [Section 253] using competitive 
procedures, but excluding other than small business concerns in 
furtherance of sections 638 and 644 of Title 15." 41 U.S.C. sec. 
253(b)(2) (Supp. Ill 1985). 

The regulations of the Small Business Administration include 
"legal services" as a category of "small business" where the size 
of the business concern is not more than § 3.5 million in annual 
receipts. 13 C.F.R. § 121.2 (1986). The FAR itself contains 
regulations for procurement as it affects small businesses, see 48 
C.F.R. Part 19 (1986), but it appears to impose a $2 million cap 
on receipts of a provider of legal services in order to qualify as 
"small." Id^ § 19.102-5. 

^^"^Id. 41 U.S. §§ 259(c), 403(7) (Supp. Ill 1985). 

•'-^^Id. § 253a(a)(2)(A). 

•'•^^Id. § 253(a)(2)(A)(ii). See note 125 supra . 

•'•^'^Id. § 253(a)(2)(B). 

■^"^^Id. § 253(c). 



326 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



one responsible source and no other type 
of property or services will satisfy the 
needs of the executive agency; 

(2) the executive agency's need for the 
property or services is of such an 
unusual and compelling urgency that the 
Government would be seriously injured 
unless the executive agency is permitted 
to limit the number of sources^from which 
it solicits bids or proposals. 



(7) the head of the executive agency- 

(A) determines that it is necessary in 
the public interest to use 
procedures other than competitive 
procedures in the particular 
procurement concerned, and 

(B) notifies the Congress in writing of 
such determination not less than 30 
days before-, the award of the 
contract. 

Even where exemption (2) applies, the agency is required to 
"request offers from as many potential sources as is practicable 
under the circumstances." Moreover an agency may not award a 
contact using procedures other than competitive procedures based 
on exemptions (1) or (2) unless the contracting officer justifies 
the action in writing and certain approvals are obtained. If, 
however, exception (2) is relied upon, the required justification 
and approvals may be made after the contract is awarded. The 



149 

Id. § 253(c)(1). Where, for instance, in the geographical 

area where the services are to be rendered, only one lawyer or 

firm has the necessary expertise, this section may be applicable. 

As Appendix A to this Report indicates, this exception has in fact 

been relied upon by agencies in obtaining legal services. 

•^^^Id. § 253(c)(2). 

^^•^Id. § 253(c)(7)(A), (B). 

152 

Id. § 253(e). 

-^^^Id. § 253(f)(1). 

^^"^Id. § 253(f)(2). 



CONTRACTING FOR LEGAL SERVICES 327 



format for the justification is prescribed. The statute 
requires, in part, that the agency expressly determine that the 
anticipated cost will be fair and reasonable. It is not 
permissible to justify the use of procedures other than 
competitive orocedures "on the basis of the lack of advance 
planning. " 

The language of the exemptions and the procedures that 
accompanVctheir use suggest that they should be only sparingly 
invoked. With regard to attorneys' services, they would appear 
to be of relatively limited use. 

There is one additional exemption from the requirement that 
agencies "obtain full and open competition though the use of 
competitive procedures" that might be significant from the point 
of view of legal services contracts. Specifically, in^tbe case of 
contracts for an amount which does not exceed $25,000, the 
statute authorizes the adoption of "special simplified 
procedures" "[i]n order to promote efficiency and economy in 
contracting and2to avoid unnecessary burdens for agencies and 
contractors." However in using these procedures, an agency 



•'•^^Id. § 253(f)(3). 

•'•^^ Id. § 253(f)(3)(C). The justification must also include a 
description of the agency's needs, identification of the exception 
relied upon, a demonstration based on the contractor's 
qualifications or nature of procurement of the reasons for using 
the exception, a description of the market survey conducted or 
reasons why it was not conducted, a listing of sources expressing 
interest in procurement, and a statement of actions the agency may 
take to remove barriers to competition in the future. Id. 
§ 253(f)(3)(A), (B), (D), (E), (F). This justification must be 
available for public inspection. Id. § 253(f)(4). 

-'•^^Id. § 253(f)(5)(A). 

158 

See Ruttinger, Acquiring the Services of Neutrals for 

Alternative Means of Dispute Resolution and Negotiated Rulemaking , 

1986 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

RECOMMENDATIONS AND REPORTS at 881 (". . . the market surveys, 

sole source determinations, and gamut of agency approvals required 

by Parts 6 and 7 of the FAR may make it difficult for an agency to 

proceed on a sole source basis in a timely fashion."). 

•'•^^See text at notes 416-19 infra. 

■'■^°41 U.S.C. § 253(g)(2). 

•'•^-^Id. § 253(g)(1). 



328 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



must "promote competition to the maximum extent practicable." 
Further discussion of thp|e procedures will be postponed until the 
examination of the FAR. 

The CICA requires that each solicitation for competitive 
proposals (other than for small purchases) must at a minimum 
include a statement of all significant factors, including price, 
which the agency expects to consider in evaluating the proposals, 
along wijg^the relative importance assigned to each of those 
factors. In the case of competitive proposals, there must be 
"a statement that the proposals are intended to be evaluated with 
and awards made after, discussions with the offerors, but might be 
evaluated and awarded without discussions with the offerors." 
The time and place for submission of proposals must also be 
included in the solicitation. Specifications included in the 
solicitation must be developed "in such a manner as is necessary 
to obtain full and open competition with due regard to the nature 
of the . . . services to be acquired." 

Except where one of the exemptions^from the use of 
competitive procedures is applicable, agencies intending to 



-ICO 

Id. § 253(g)(4). See also Ruttinger, supra note 158, at 
888-95 for a discussion of various specific procurement techniques 
that may [or may not] be applicable to obtaining attorney 
services — small purchases, indefinite supply contracts, basic 
ordering agreements, blanket purchasing agreements and supply 
schedules . 

164 

See text at notes 192-94 infra. 

■"■^^41 U.S.C. § 253a(b)(l)(A), (B). 

•'•^^Id. § 253a(b)(2)(B)(i). 

-'•^^Id. § 253a(b)(2)(B)(ii). 

1 fift 

Id. § 253a(a) (1) (C) . In preparing for the procurement the 
agency must also "specify its needs and solicit bids or proposals 
in a manner designed to achieve full and open competition," and 
"use advance procurement planning and market research." Id. 
§ 253a(a) (1) (A) , (B). Each solicitation must include 
specifications which permit full and open competition and "include 
restrictive provisions or conditions only to the extent necessary 
to satisfy the needs of the executive agency or as authorized by 
law." Id^ § 253a(a)(2)(A), (B). The type of specification shall 
depend "on the nature of the needs of the executive agency and the 
market available to satisfy such needs." Id. § 253a(a)(3). 

Id. § 416(c)(2). [Exemption (1) (sole source) to Section 
253 is not exempt from the notice requirements. See id. 
§ 416(2).] See also id. § 416(3) (no notice if determination it 
would not be "reasonable" or "appropriate" to issue it). 



CONTRACTING FOR LEGAL SERVICES 329 



solicit proposals for a contract for services for a price expected 
to exceed $10,000 must furnish the Secretary of-j^^gmmerce a notice 
for publication in the Commerce Business Daily. Among other 
things, this notice must accurately describe the services 
contracted for. If interested in submitting a proposal, a 
prospective contractor can then make a, business judgment whether 
to request a copy of the solicitation. Where these notices are 
required, agencies are limited with respect to the time when they 
may issue a solicitation anj^^ith regard to setting deadlines for 
the submittal of proposals. 

The statute requires the agency to evaluate competitive 
proposals based solely on the factors specified in the 
solicitation. It may reject all proposals if the ag^gcy head 
determines that such action is in the public interest. 

The agency has the discretion to have discussions with^^^ 
offerors with regard to their proposals prior to any award. If 
it chooses to do so, it must conduct discussions, oral or written, 
with all responsible sources who submit proposals within the 
competitive range, considerina^only price and the other factors 
included in the solicitation. Or the agency can award the 
contract without such discussions "when it can be clearly 
demonstrated from the existence of full and open competition or 
accurate prior cost experience with the . . . service that 
acceptance of an initial proposal without discussions would result 
in the lowest overall cost to the Government." Unless all 
proposals are rejected, the agency must award the contract with 



-'•'^^Id. § 416(a)(1). 
^"^-^Id. § 416(b)(1). 

-^"^^Id. § 416(a)(3). 

•^^"^ Id. § 253b(a). See GAO opinion in Matter of Wolf, Block, 
Schorr and Solis-Cohen, B-221363.2 (May 28, 1986) (unpublished) 
(contract award protest rejected on basis that while the protester 
promised a lower price, technical qualifications of another 
proposal justified award to another law firm). 

''•^^ Id. § 253b(b). There are also provisions for 
"qualification requirements" (designed for quality assurance) that 
might perhaps apply to the legal services area. Id. § 253(c). 

^"^^Id. § 253b(d)(l). 

-^^^ Id. § 253b(d)(2). In retaining attorneys, such pre-award 
discussion would appear to be a likely occurrence. 

^"^^Id. § 253b(d)(l)(B). 



330 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



"reasonable promptness to the responsible source whose proposal is 
most advantageous to the United States, considering only price and 
the other factors included in the solicitation." ,pA 

who , inter 
satisfactory 
ntegrity and business ethics, "'^"'^ and who "has the 
necessary organization, experience, accounting and operational 
controls, and technical skills, or the ability to^obtain such 
organization, experience, controls, and skills." 



"responsible source" means a prospective contractor 
alia, "has a satisfactory performance record," "a s 
record of integrity and business ethics." and who " 



In additiongjhe statute regulates the types of contracts that 
may be executed and requires that any contract awarded 
expressly permit examination^of the relevant books and records of 
the contractor by the GAO. 

4. Federal Acquisition Regulation . 

The Federal Acquisition Regulation which is^found in title 48 
of the Code of Federal Regulations, chapter 1, is prepared, 
issued and maintained jointly by the Secretary of Defense, the 
Administrator of General Services, and the Administrator of the 
National Aeronautics and Space Administration under their 
respective statutory authorities. It applies to acquisitions 
of property and services by contract with appropriated funds. 
By its terms, therefore, this system of regulations would appear 
to be inapplicable in the case of executive agencies in those 
instances where attorneys' fees are paid out of the funds 



•'•^^Id. § 253b(d)(4). 

-^^^Id. §§ 259(c), 403(8). 

-^^•"-Id. § 403(8)(C). 

■^®^Id. § 403(8)(D). 

-"-^^Id. § 403(8) (E). It has been estimated that the full 
competition process consumes a minimum of two to three months. 
See Ruttinger, supra note 158, at 879. See also text at notes 
206, 420 infra. 

-^^^Id. § 254(a), (b). 

•'•^^Id. § 254(c). 

■'■^^48 C.F.R. ch. 1 (1986). 

187 

Id. § 1.102(b). Agencies may, within limits, issue 

acquisition regulations that implement or supplement the FAR. Id. 

§ 1.301(a)(1). 

^®^Id. § 2.101. 



CONTRACTING FOR LEGAL SERVICES 33 



1 ft Q 

collected. Such may be the case with respect to the 1986 Debt 
Collection Amendments pursuant to which contingency fee agreem^^gs 
may be utilized and are in fact the preferred fee arrangement. 
For current purposes the contents of the FAR largely repeat the 
statutory requirements for competitive procurement described above 
and need not be repeated here . 

The procedures for so-called "small purchases," that is, 
acquisitions of services in the amount ojg|25,000 or less, apply 
only to non-personal services contracts . For purchases not 
over $1,000 a purchase may be made without securing competitive 
quotations if_the contracting officer considers the price to be 
reasonable. For contracts in excess of that amount, there is a 
requirement of solicitation of quotations from a reasonable number 
of sources in-order to promote competition to the maximum extent 
practicable. 

5. OFPP's Study of Professional Services Contracting . 

Section 2753 of the Competition in Contracting Act of 1984 
directed that not later than January 31, 1985, the Administrator 
of the Office of Federal Procurement Policy 

complete a study of alternatives and recommend 
to the Committee on Governmental Affairs of 
the Senate and the Committee on Government 
Operations of the House of Representatives a 
plan to increase the opportunities to achieve 
full and open competition on the basis of 
technical qualifications, quality, and other 
factors in the procurement of profe^^^onal, 
technical, and managerial services. 

The study was completed on schedule and transmitted to 
Congress. While legal services were considered to be 



189 

But see note 131 supra . 

■"■^^See text at notes 237-40 infra . But see note 131 supra 

•'•^•'-See, e.g. , 48 C.F.R. Part 6 (1986). 

-'•^^Id. § 13.000, 13.101. 

-'•^^Id. § 13.106(a)(1). 

194 

Id. § 13.106(b)(1). 

■"■^^Pub. L. 98-369, 98 Stat. 1203. 

■"•^^OEPP, STUDY OF PROFESSIONAL SERVICES CONTRACTING (Jan. 
1985) (hereinafter "OFPP Study"). 



332 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



1 QT 

"professional services" within the meaning of the statute, "the 
associations of many professions, including . . . law . . . did 
not submit comments or participate in the proceedings of the 
study." The final report suggests that this apparent lack of 
interest might have been attributable to satisfaction with the 
present contracting process . 

In summarizing its findings, the report noted that those 
private organizations participating in the study identified what 
they believed were various problems prevalent in the contracting 
practices of many government agencies: 

(1) the tendency of price to dominate in the 
contractor selection process; 



197 

OFPP Study, Appendix C at 35. 

^^^Id, at 3. 

l^^Id. 

Notes 201-06 infra extensively cite from the OFPP Study 
because of the background information dealing with government 
contracting contained therein that is relevant generally to the 
legal service area as well as for the observations that may be 
specifically relevant to the hiring of outside counsel. 

201 

Dominance of Price 

Traditionally, the preferred method of procurement within 
Government has been formal advertising. Under the formally 
advertised, sealed bid method, the work to be performed is 
described in sufficient detail to permit award to the lowest, 
responsive, responsible bidder without pre-award discussions. 
Price is the sole criterion for selecting a contractor from among 
the responsive, responsible bidders. 

In service contracting, pre-award discussions are generally 
considered necessary, because it is difficult to develop a 
sufficiently detailed description and understanding of the work to 
be performed to permit award of a contract without discussion. 
The procurement regulations provide for pre-award discussions and 
the use of "the negotiated method of procurement" where 
sufficiently detailed specifications cannot be developed to permit 
formal advertising. 

The negotiated method of procurement, in addition to 
permitting discussions, permits contract award to be based on 
factors other than price. Price, in terms of dollars, however, is 
easily understood and simple to apply as a selection criteria. 
One of the recurring criticisms received from the private sector 
during the course of the study was that the Government tends to 
"take the easy way out" and accept low-priced offers rather than 



CONTRACTING FOR LEGAL SERVICES 333 



(2) the difficulty of developing good 
statements of work; 



(continued from previous page) 

justify the acceptance of higher-priced, technically superior 
ones. 

The tendency of price to be a dominant factor in selecting a 
professional service contractor is a longstanding issue. In 1972, 
Congressman Jack Brooks recognized the ingrained nature of price 
competition in Government procurement and sponsored and guided 
into law H.R. 12807 (now Public Law 92-582 — The Brooks A-E 
Selection Statute). The statute effectively prohibits the 
selection of architects-engineers for Government work on the basis 
of price competition. 

The controversy over the respective roles of "price" and 
"technical merit" as factors influencing the selection of a 
contractor to perform professional services has continued during 
the 12 years since the enactment of P.L. 92-582. Competition and 
price competition are often thought of as synonymous. Competition 
IS fundamental to Federal procurement, and even though the 
procurement regulations encourage technical competition, it is 
perceived by many that the spirit in which the regulations are 
implemented often stresses price. This has caused problems in 
professional services contracting, and the Government is sometimes 
accused of being "penny-wise and pound- foolish" when it accepts 
offers primarily on the basis of price. 

OFPP STUDY at 4. 

202 

Poor Statements of Work 

The definition of the work to be performed under a service 
contract is crucial. If the work is not properly defined and 
described, the result will be a misunderstanding and controversy. 
Unfortunately, there is no universal method for writing high 
quality statements of work. Each statement must be tailored to 
the particular task to be performed and the quality level of 
services required. Some tasks lend themselves to explicit 
definition; others are best described in terms of mission need or 
performance requirements. 

The statement of work is a part of the contract and is 
binding on both the contractor and Government. Since the written 
words in the statement translate into cost and profit, poorly 
written statements may create misunderstandings and lead to 
adversary or unproductive relationships between the Government and 
its contractors. Some contractors offering comments on the study 
indicated there is no such thing as a perfect statement of work. 
These contractors state that the only way the Government can 



334 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



(3) the use of procedureSothat result in 
technical leveling; 



(continued from previous page) 

protect itself and be assured of obtaining the best value is to 
negotiate the exact task to be performed (not how it will be 
performed) after a contractor is selected. Otherwise, the 
contractors maintain, gamesmanship will occur. 

The form of gamesmanship alluded to by the contractors 
purportedly occurs when a contractor spots a flaw, omission, or 
ambiguous term in the statement of work, but does not mention it 
until after the contract has been awarded. If the contractor 
spotting the flaw or omission is awarded the contract, the problem 
is then brought to the attention of the Government, and a change 
order is required. The contractor, then, has the opportunity to 
"get well" on the change order, as competition no longer exists. 

In any event, the Government's best protection against the 
occurrence of gamesmanship is to express the services to be 
performed in clear, simple, and legally-enforceable terms. In all 
situations, however, the Government is, to a certain extent, 
dependent on the professionalism of the contractor performing the 
task. There is no method totally effective in preventing 
gamesmanship. Industry spokesmen suggested that circulation of 
draft work statements would help improve the overall quality and 
specificity of the statements. Government personnel indicated 
that detailed discussions of the statement of work during 
negotiations, when coupled with thorough cost analysis, 
examination of a contractor's past performance, and the 
establishment of negotiated ceilings on certain cost elements, 
were generally adequate to protect the Government from possible 
gamesmanship and from the problem of buy ins. . . . 

OFPP STUDY at 5. 

203 

Technical Leveling 

Section 15.610 of the FAR defines technical leveling as, 
"helping an offeror to bring its proposal up to the level of other 
proposals through successive rounds of discussion, such as by 
pointing out weaknesses resulting from the offeror's lack of 
diligence, competence, or inventiveness in preparing the 
proposal . " 

Although prohibited by the FAR, technical leveling was, 
perhaps, the most frequent complaint received from the private 
sector during the course of this study. One of the organizations 
testifying at the September 13, 1984, public meeting described 
technical leveling as: 



CONTRACTING FOR LEGAL SERVICES 335 



(continued from previous page) 

Technical leveling . . . typically occurs in a 
negotiated procurement situation where 
technical portions of proposals are initially 
evaluated and scored, along with the cost 
proposals. After the initial evaluation and 
scoring, there ensues a process (commonly 
referred to as discussions, negotiations, or 
offer clarification) where the technical 
scores are converged to the point where at 
least the top two or three proposals are not 
only in a competitive range, but very close, 
often separated by only a few points on a 
scale of 100. This results in a level profile 
of technical proposals within the competitive 
range which, de facto, shifts the attention to 
cost as the factor to determine the ultimate 
selection. Cost, in turn, is often 
"low-balled" or simply unrealistic in terms of 
the nature of the service requirement. 

The combination of the technical leveling and 
the consequent shift to cost as the award 
determinant is bureaucratically and 
politically compelling; that is, source 
selection authorities and source evaluation 
board members find it difficult to not simply 
take the safe course of action, which is to 
select the low bid if it can be rationalized 
as "realistic." 

The net effect of the above process for the 
Government manager seeking highest quality is 
truly perverse: he or she is forced to accept 
a source who may be just qualified , as opposed 
to a source who is demonstrably the best 
qualified and most competent and most likely 
to perform satisfactorily against demanding 
high quality requirements; and he or she often 
faces a significant possibility of a cost 
overrun and/or serious performance shortfall. 

In considering technical leveling, as described above, it 
must be kept in mind that a legitimate role of negotiations is to 
clarify ambiguities and identify deficiencies in the proposals of 
all offerors having the potential to receive an award so that the 
offerors are given an opportunity to meet the Government's 
requirements. In those instances when discussions result in the 
elimination of technical problems, the Government is often 
justified in making an award, based on cost, between equally 
satisfactory proposals. 



336 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



(continued from previous page) 

In May 1984, the General Accounting Office (GAO) issued a 
decision (B-212675) involving Harrison Systems Ltd., who protested 
the award of a contract by the United States Information Agency. 
The contract was for the design and installation of a studio 
control room and technical operations facilities. The decision 
illustrates the complexity and subtlety of the judgments required 
to prevent technical leveling and, at the same time, protect the 
Government. In its decision, GAO ruled: 

Even though the solicitation states that 
technical factors will be weighted 70 percent 
and price 30 percent, and award will be made 
to the offeror with the highest combined point 
total, the agency may properly award to a 
lower technically rated, lower priced offeror 
with lower combined point total because the 
contracting officer made a reasonable 
determination that there was no significant 
technical differences between the proposals 
and award to the lower priced offeror was most 
advantageous to the Government, notwith- 
standing that there was a 14.4 percent 
difference in the technical scores of the 
highest scored offeror and the offeror 
receiving the award. 

GAO had previously issued decisions on both sides of the 
issue regarding a contracting officer's discretion in implementing 
the award criteria specified in the solicitation. In an RCA 
Service Company decision (B-202871), August 22, 1983, GAO ruled 
that: 

"Even where the RFP evaluation factors 
indicated that award would be made to that 
offeror with the highest point score, we have 
held that before the contracting agency can 
award to the highest priced (or higher cost) 
technically superior offeror, the contracting 
agency is required to justify such award in 
the light of the extra expenditure required." 

In its Telecommunications Management Corporation decision, 57 
Comp Gen 251, 1978, GAO indicated that: 

Where the solicitation sets forth a precise 
numerical evaluation formula, including price, 
and provides that the awardee will be selected 



CONTRACTING FOR LEGAL SERVICES 337 



(continued from previous page) 

on the basis of total score, the contracting 
agency must award to the highest scored 
offeror if the source selection official 
agrees with the scoring. 

GAO, in issuing B-212675, acknowledged that the RCA and 
Telecommunications Management Corporation decisions were "somewhat 
inconsistent." GAO summed up its views by stating: 

While we think that both cases were decided 
correctly, the relevant statements went beyond 
what was necessary to decide the cases. We 
now think that both views are too extreme. 
The better view, which we adopt, is that when 
the RFP contains a precise numerical 
evaluation formula, including cost/price, and 
a statement that award will be made to the 
highest point scored offerors, the contracting 
officer or other source selection authority 
retains the discretion to examine the 
technical point scores to determine whether a 
point differential between offerors represents 
any actual significant difference in technical 
merit. If it does not, then award may be made 
to the lower cost or priced proposal, even 
though its total point score is lower. In 
effect, the contracting official would be 
rescoring the technical proposals 
conceptually, but not mechanically, and would 
not really be altering the predetermined 
cost/technical tradeoff. If, however, the 
source selection official determines that the 
point difference represents actual technical 
superiority and he agrees with the scoring, 
then he must abide by the formula and award to 
the offeror with the highest total point 
score. He may not decide that the technical 
superiority is not worth the cost difference. 
That would alter the predetermined 
cost/technical tradeoff. Additionally, we 
think that if the award is to be made to a 
more expensive higher total point scored 
offeror in accordance with the formula, there 
is no necessity for the contracting agency to 
make a separate determination that the extra 
expense is justified, since that determination 
is made when the formula is devised. 

OFPP STUDY at 7-9. 



338 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



(4) the lack of cost realism^and the 
occurrence of "buy-ins;" 



^° Suy ins 



Buy ins may occur in service contracting, as in other types 
of contracting, when a contractor knowingly understates the 
estimated cost and, therefore, the proposed contract price. This 
may be done in expectation of obtaining the proposed contract and 
then increasing the price through change orders or during 
follow-on contracts. Buy ins also occur, however, in certain 
instances, when a contractor is attempting to "break into" the 
market. These contractors are sometimes willing to take an 
initial contract at cost, or even at a loss, in order to establish 
a performance record for future contracts. 

Evaluating proposals received in response to a service 
requirement and ascertaining whether the proposed work can be 
performed for the offered price is sometimes difficult. The 
capability of offerors to meet the Government's needs is based 
almost entirely on information submitted by the offerors, each of 
whom has a vested interest in obtaining the proposed contract. 
The equipment, facilities, and personnel capabilities required to 
perforin some services can be evaluated with some certainty. The 
performance of many services, though, requires intellectual skills 
and creativity. It is difficult, at best, to estimate, with the 
same certainty, the knowledge an offeror's personnel possess, the 
value of that knowledge, or how the personnel will use their 
expertise to efficiently and effectively perform a task or 
service. 

Several persons and organizations suggested that past 
performance on comparable contracts (particularly with regard to 
cost realism) is the best way to judge an offeror's probability of 
performing in the future. They recommended that past performance 
carry "more weight" in selecting contractors for future work and 
that Government personnel be given specific training in evaluating 
price proposals. 

Acceptable past performance, of course, is based on a 
contractor's past history of performing the required tasks at the 
desired quality level, on time, within budget, and in conformance 
with all contractual requirements. A contractor who has performed 
in this manner in the past will "have a good track record." That 
does not mean, however, that new offerors may not also perform 
well or even better. It, also, does not mean that good track 
records should not be discounted when the purchasing official has 
a reasonable basis to believe they no longer accurately reflect 
the offeror's ability or willingness to perform. 

OFPP STUDY at 6. 



CONTRACTING FOR LEGAL SERVICES 339 



(5) the shortage of highly2tf ained 
contracting personnel; and 

(6) the length-pf time required to award a 
contract. 



205 

Need for Better Trained Personnel 

In addition to revealing the complexities involved in 
developing and administering criteria for awarding professional 
services contracts, GAO's ruling in B-212675 indicates that 
contracting is not an exact science or a mechanical process. 
Trained contracting personnel are essential to maintaining the 
delicate balance required within the system between sufficient 
operating flexibility to protect the Government's interests and 
the structure required to maintain its integrity. 

Contracting, whether for services or hardware, requires the 
exercise of sound judgment. There is no substitute for skilled, 
competent personnel. Trained personnel will often succeed in 
obtaining a good contract, notwithstanding the constraints imposed 
by the contracting methodology employed. Conversely, untrained 
personnel may produce an unworkable contract, notwithstanding an 
effective contracting process. 

Several major organizations commented that the current 
problem in professional services contracting stems from attitudes 
of the personnel doing the contracting and not necessarily from 
inadequate regulations or procedures. Training in professional 
services contracting was stressed as a means of altering the 
perception attributed to many contracting personnel that, rightly 
or wrongly, the "low offer is always the best and safest." 

OFPP STUDY at 9-10. 
y Of. 

Long Procurement Lead Times 

Procurement administrative lead time (PALT) is generally 
regarded as the total time required to process a procurement 
action, beginning with the time a procurement request is received 
in the procurement office and ending with the award of the 
contract. Industry and Government officials, both, acknowledge 
that the procurement cycle, "simply takes too long." The 
Professional Services Council reported that, in their members' 
experience: (1) it usually takes a year between the drafting of a 
scope of work and the award of a contract; and (2) it almost 
always takes from 4-6 months for an agency to award a contract 
after receipt of proposals. Problems occurring as a result of the 
long processing times include: higher prices because of built-in 
escalation factors; difficulty of scheduling and retaining key 
personnel; a change in requirements over time; and a reduction in 
the number and quality of competing firms. 



340 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Of course, it is possible that the same or similar problems 
exist in the area of government procurement of legal services. 
The lack of complaints by the legal contracting sector during the 
study may have reflected either satisfaction or simply ignorance 
that the study was proceeding. 

The Government contracting community apparently was largely 
satisfied with the existing contracting process and agency 
representatives to the OFPP task group did not agree with industry 
perceptigns regarding the pervasiveness of the problems noted 
above. "Contracting officials stated that current procedures 
provide for the proper consideration of both cost and technical 
factors and that contract award can now be made on the basis of 
technical and quality factors when appropriate to do so." 
Apparently the OFPP study had little generative significance in 
the contracting area. 

IV. Debt Collection Amendments of 1986 

A. Introduction 

On November 3, 1986 President Reagan approved Pub. L. 99-578 
which establishes a pilot program for the retention of attorneys 
engaged in private practice in an effort to collect the non-tax 
indebtedness owed to the United States. In enacting this 
legislation Congress addressed various issues that are relevant 
outside the area of debt collection. For that reason, detailed 
consideration of the new statute and its legislative history is 
required. 

As of September 30, 1985 non-tax delinquent debts owed the 
the federal government had grown to $23.6 billion, double^the 
$11.7 billion reported outstanding in fiscal year 1981. 
Without litigation to recover these amounts it was estimated that 
$6.7 million was, lost each day due to the running of the statute 
of limitations. Under existing law judicial enforcement of 



(continued from previous page) 
OFPP STUDY at 10. 

207id, at 3. 

208idL 

^O^Id, at vii. 

^■^^S. Rep. No. 99-256, 99th Cong. 2d Sess. 2 (1986) 
(hereinafter "S. Debt Report"). 



CONTRACTING FOR LEGAL SERVICES 341 



212 
claims fell to the Department of Justice2-|3 which, given other 

matters deemed to be of higher priority, allegedly lacked the 

resources to mount an effective debt collection campaign in the 

courts. Moreover since efficient and effective debt collection 

was believed to require some experience with debtor psychology and 

techniques to avoid payment as well as^l^owledge of state laws 

with regard to post- judgment remedies, employment of private 

counsel appeared to Congress to be a viable alternative method of 

collection. Testimony at hearings held on the legislation 

indicated that several states had utilized the services gj.^private 

attorneys for debt collection with considerable success. 

The legislation that was enacted as the "Debt Collection 
Amendments" originated in the Senate where hearings were held by 
the Subcommittee on Energy, Nuclear Proliferation, and Government 
Processes of the Committee on Governmental Affairs. The full 
Senate approved^the committee reported bill without amendments on 
March 19, 1986. Similar bills were considered in the House by 
the Subcommittee on Administrative Law and Governmental Relations 
of the Committee on the Judiciary. The full committee reported a 
bill which was adopted by the House without amendment on 
September 29, 1986. Some relatively minor differences between 
the bills passed by the Senate and House were resolved when J^g 
Senate voted to accept the House version on October 8, 1986. 
The President approved the bill on November 3, appending, however. 



^■"■^See 5 U.S.C. §§ 3106; 28 U.S.C. §§ 516, 518(b), 519, 547 
(2) (1982). 

^•^-^See H. Rep. No. 99-909, 99th Cong. 2d Sess. 4 (1986) 
(hereinafter "H. Debt Report"); S. Debt Report at 2 , 3. 

^■^^B. Debt Report at 4; S. Debt Report at 3. 

^■^ ^Hearing Before the Subcommittee on Energy, Nuclear 
Proliferation, and Government Processes of the Senate Committee on 
Governmental Affairs on S. 209 (Federal Debt Recovery Act of 
1985), 99th Cong. 2d Sess. (hereinafter "1986 Sen. Hearings") 92 
(statement of William Guice III) (1986). 

^■"■^See S. Debt Report at 6. 

^''"^1986 Sen. Hearings at 35-83. 

^■"■^132 Cong. Rec. S2989 (daily ed. March 19, 1986). 

^•^^Id. H8563, 8569 (daily ed. September 29, 1986). 

^^°Id. S15616 (daily ed. October 8, 1986). 



342 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



a signing statement regarding his interpretation of the 
legislation. 

The enacted legislation amends Section 3718 of title 31 of 
the United States Code. Prior to the 1986 amendments, that 
provision authorized the head of an executive or legislative 
agency to make contracts with collection agencies to^recover 
indebtedness owed to the United States Government. Now those 
same officials "may, subject to the approval of the Attorney 
General, refer to a private counsel . . . claims of indebtedness 
owed the2ygited States arising out of activities of that 
agency." Referral is, however, limited to private counsel 
retained by the Attorney General pursuant to contracting |^|hority 
expressly granted and conditioned by the new legislation. 

For a variety a reasons, including presumably a concern for 
the abuses that might arise in its administration, the legislation 
is limited in a variety of ways which demonstrate the character of 
the program as experimental only. First of all, the new act is 
effective for only three years, which period is to commence on the 
effective date of implementing regulations adopted by the Justice 
Department. Those regulations are mandated by the legislation 
and must be submitted to Congress at least 60 days before they 
become effective. Congress did not expressly specify a date by 
which such regulations must be issued. However, it did require 
that within 180 days of the enactment of the new legislation, the 
Attorney General submit to Congress a2geport of the actions taken 
under his new contracting authority. This might be taken to 
suggest an assumption by Congress that the implementing 
regulations would be in place no later than that date. 

The other significant limitation is not temporal but 
geographical. The contracting authority can be exercised to 
obtain legal services in not more than ten federal judicial 



^^■'"22 Weekly Compilation of Presidential Documents 1464 
(Nov. 3, 1986), reprinted in 1986 U.S. CONG. AND ADMIN. NEWS 5619. 

^^^31 U.S.C. § 3718 (1982 and Supp. II 1983). 

^^-^Id. § 3718(a). 

^^"^Sec. 1(4), Pub. L. 99-578 (adding subsection 3718(b)(2)). 

^^^Sec. 5, Pub. L. 99-578. 
^^^Sec. 4, Pub. L. 99-578. 
^^®Sec. 2, Pub. L. 99-578. 



CONTRACTING FOR LEGAL SERVICES 



343 



districts. While part of the new legislation appears to vest 
the Justice Department with2tptal discretion whether or not to 
exercise its new authority, it was apparently contemplated25^at 
Justice would in fact exercise it in at least five districts. 

B. Program Detail 

1. Services Covered . The Attorney General may make contracts 
with private counsel "to furnish legal services, including 
representation^ in negotiation, compromise, settlement and 
litigation." While the literal language of the statute could 
be construed to cover legal services that do not arise directly 
from or are not directly related to litigation, the clear focus of 
the legislation was on permitting the retegj^on of attorneys for 
pursuing collection efforts in the courts. 

2 . Contract Terms . 

a) Fees . Each contract is to include "such terms and 
conditions as^the Attorney General considers necessary and 
appropriate." One of the most important of these relates to 
the compensation paid attorneys who are hired. Contracts must 
specify "the amount of-, the fee to be paid ... or the method for 
calculating that fee"^ and "may provide that a fee2§gPerson 
charges ... is payable from the amount recovered." The 
statutory language thus indicates that contingency fees aj^^ 
authorized but not necessarily required in all instances. 
However the legislative history indicates that in the debt 



229 



230 



Sec. 3, Pub. L. 99-578. 

Sec. 1(4), Pub. L. 99-578 (adding a new subsection 



3718(b)(1)(A)). 

^^■^Sec. 3, Pub. L. 99-578. The five districts initially 
chosen encompass Miami, Los Angeles, Detroit, Houston and New 
York. Legal Times , Feb. 16, 1987, Vol. IX, No. 36. 

^^^Sec. 1(4), Pub. L. 99-578 (adding a new subsection 
3718(b)(1)(A)). 

^^^See, e.g. , S. Debt Report at 2-4. 

^^^Sec. 1(4), Pub. L. 99-578 (adding a new subsection 
3718(b)(1)(A)). 

Sec. 1((2), Pub. L. 99-578 (amending and redesignating 



236 



subsection 3718 (b ) ) . 

^^^See also H. Debt Report at 6 ("Such contracts could be 
made on a fixed fee or contingent basis."). 



344 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



238 
collection area payment is generally by contingent fee and 

Congress expected that in all, or almost all, instances such„a fee 

arrangement would be the prescribed method of compensation. 

The prospect of collection.of money owed the government without 

substantial taxpayer cost proved particularly alluring. 

At the same time the statute directs that "the amount of the 
fee payable . . . may not exceed the fee that counsel engaged in 
the private practice of law in the area or areas where the legal 
services are furnished typically charge clients for furnishing 
legal services in the collection of claims of indebtedness 
. . . ." Among other things this provision would seem to mean 
that in an area where collection attorneys are not paid on a 
contingency basis and the fee charged under the fee structure 
prevailing there would be less than that paid under a contingency 
contract, the Attorney General can (and must) make^^^fee 
arrangement in accordance with the local practice. 

The statute gives no guidance as to how to identify the 
"typical fee." Since competitive procedures will be utilized to 
award these contracts, the proposals themselves may be some 
evidence of the "typical fee" in the area, but it would be 
difficult to justify reliance solely on those. Some additional 
investigation, such as a letter survey of a substantial portion of 
the local collection bar and inquiries directed to local bar 
associations, would appear to be minimal steps necessary to give 
some clear guidance on this matter. 

The legislation does, however, indicate that differences in 
fees charged by the same attorney for different claims can be 
justified on the basis of "the amount, age, and nature of the 
indebtedness and whether the debtor is an individual or a business 



^^^See, e.g. , H. Debt Report at 5. 

^^^See S. Debt Report at 7; H. Debt Report at 5. 

240 

There may be some taxpayer cost to the extent filing, 

service and other fees and co§ts of suit must be advanced from 

appropriated funds and are not ultimately recovered from the 

debtor. See note 131 supra . 

241 

Sec. 1(4), Pub. L. 99-578 (adding a new subsection 

3718(b)(1)(A)). 

242 

Also if the debt instrument provides for the debtor's 

payment of attorneys fees, the government's attorneys can collect 

their compensation along with the debt at no cost to the 

government. S. Debt Report at 7. Contracts with counsel should 

anticipate that possibility and limit attorney compensation 

accordingly. 



CONTRACTING FOR LEGAL SERVICES 345 



entity." This language suggests that the factors thus 
enumerated are the only ones that can be used to support 
differentials in fees charged for the collection of different 
debts. The assumption seems to be that these are factors that 
generally enter (or should enter) into the calculation of the 
"typical fee" of a collection attorney. 

Congress apparently expected that Justice would write 
contracts with particular attorneys to cover not just one claim 
but a large number. In fact the testimony at the subcommittee 
level suggested that the economies of debt collection and 
facilitation of supervision of attorneys' work^l^gued in favor of 
using few rather than many attorneys or firms. On the 
assumption, therefore, that a contract under the new act covers a 
multitude of debts which vary considerably in amount, age, and 
nature of the claim and debtor it is likely that, even where only 
contingent fees are provided for, the provisions regarding fees 
charged are likely to be rather complicated where in fact the 
"typical" practice of attorneys in the area is to vary fees based 
on such factors. 

b) Control . Maintenance of control by the federal government 
over the activities of private counsel taken pursuant to these 
contracts was obviously a matter of highest import for Congress in 
drafting this legislation. Moreover, President Reagan in 



^^^Sec. 1(4), Pub. L. 99-578 (adding a new subsection 
3718(b)(1)(A)). 

^^"^ See , e.g. , S. Debt Report at 7; Hearing Before the 
Subcommittee on Administrative Law and Governmental Relations of 
the House Committee on the Judiciary (hereinafter "House 
Hearings") 79 (1986) (statement of Deputy Assistant Attorney 
General Robert Ford). 

^^^ See , e.g. , S. Hearings at 80 (statement of Dr. Dolores 
Cross) . 

Concerns regarding control and the constitutional problems 
thereby implicated, see text at notes 8-15, supra have been voiced 
regarding this program. See Legal Times , Feb. 16, 1987, Vol. IX, 
No. 36 ("Private Lawyers See Riches in Federal Debt Collection"). 

For statements in the legislative history indicating the 
assumption that close control was expected see , e.g. , H. Dept. 
Rep. at 4 ("In granting this [contract] authority to the Attorney 
General, the Committee emphasizes the importance of the protection 
it has included in the bill to ensure its proper use"); 132 Cong. 
Rec. S.2986 (Sen. D'Amato) ("Under the careful supervision of DOJ, 
and subject to provisions which would protect the rights of 
debtors, the use of private counsel will greatly enhance the 
ability of the Federal Government to recover outstanding debt.") 
(emphasis added). 



346 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



signing the legislation indicated that he did so "knowing that the 
Attorney General will take all steps necessary to ensure that any 
contract entered into with private counsel contains provisions 
requiring on-going supervision of the private counsel so that all 
fundamental decisions, including whether to initiate litigation 
and whether to settle or compromise a claim, are executed by SiT^241 
officer of the United States, as required by the Constitution." 

The legislation requires that contracts permit the Attorney 
General "to terminate either the contract or the private counsel's 
representation ... in particular cases if the Attorney General 
finds that sugh action is for the convenience of the 
Government." Another mandated contractual provision retains 
for the head of the agency referring a claim the authority "to 
resolve a dispute regarding the claim, to compromise the claim, or 
to terminate a collection action on the claim." Monthly 
reports will have to be submitted by counsel to the Justice 
Department and the federal agency referring the claim relating to 
the services rendered during the2mQnth and the progress during the 
month in the collection efforts. 

While the statute expressly vests the power to enter into 
these contracts for legal services in the Attorney General, 
subdelegation within the Justice.. Department of the contracting 
power is apparently permitted. Whether the Attorney General 
can delegate it not to his subordinates but to other federal 
agencies is less clear. The legislative history itself focuses on 
the Justice Department's involvement in the contracting process 
and this suggests a negative answer. Realistically speaking, the 
chance that Justice would want to delegate the power away seems 
remote, particularly given the fact that this is only a pilot 
program. If the program were expanded, however, the mechanics of 



(continued from previous page) 

See also H. Debt. Rep. at 14-15 (letter from Milton J. 
Socolar, Acting Comptroller General of the United States) 
(emphasizing needs for control over private attorneys). 

^^^22 Weekly Compilation of Presidential Documents 1464 
(Nov. 3, 1986), reprinted in 1986 U.S. CODE CONG. & ADMIN. NEWS 
5619. See also note 55 supra . 

^^®Sec. 1(4), Pub. L. 99-578 (adding a new subsection 
3718(b)(5)(A)). 

^^^Id. (adding a new subsection 3718(b)(5)(B)). 

^^^Id. (adding a new subsection 3718(b)(5)(C)). 

^^■^See, e.g. , 28 U.S.C. § 510 (1982). See generally K. 
DAVIS, ADMINISTRATIVE LAW TREATISE § 3. 16-. 18 (1978). 



CONTRACTING FOR LEGAL SERVICES 347 



the procurement and monitoring processes might threaten to consume 
so much of Justice's resources that delegation to the General 
Services Administration or to some of the agencies with the 
largest amount of debt outstanding might prove inviting. At that 
point express statutory authorization for the delegation could be 
sought. 

Actual referral of particular cases is expressly vested in 
the "head" of executive and legislative agencies "subject to the 
approval of the Attorney General." Testimony regarding the 
legislation suggested that the Department of Justice would not try 
to review each case for referral2C4 and Congress apparently did 
not intend to mandate otherwise. Presumably Justice will 
formulate criteria indicating which types of cases should be 
referred and at what point in the collection effort involvement of 
collection counsel is appropriate. For example, where an 
indebtedness exceeds a particular amount (such as $30,000) Justice 
may consider that it should handle the litigation rather than 
outside counsel. Since Justice must under the statute transmit to 
Congress annual reports dealing with its collection efforts and 
those of private counsel, it will maintain continuing general 
supervision over the collection program. With respect to 
agency referral decisions, the General Accounting Office commented 
on th^ proposed legislation, noting, among other things, its 
assumption that "referral would be made in accordance with unifo^ 
standards provided in the" Federal Claims Collection Standards. 

There was considerable discussion during the legislative 
consideration of the new act regarding whether or not private 
collection agencies should be authorized by their contj|^ts to 
refer particular claims to attorneys hired by Justice. The 



OCT 

Sec. 1(4), Pub. L. 99-578 (adding a new subsection 
3718(b)(2)). 

House Hearings at 78 (statement of Deputy Assistant 
Attorney General Robert Ford). 

^^^S. Debt Report at 8. 

^^^Sec. 1(4), Pub. L. 99-578 (adding a new subsection 
3718(c)). 

^^^See S. Debt Report at 8. 

^^®H. Debt Report at 14. See 4 C.F.R. ch. II (1987) 
(standards for the administrative collection, compromise, and 
termination of agency collection efforts, and referral to GAO and 
Justice of claims for litigation). 

^^^See S. Hearings at 106-150; H. Hearings at 142-185. 



348 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



collection agency lobby argued for that power and, when the bill 
was first before the Senate, one of the sponsor's of the 
legislation suggested that the legislation did not prohibit such 
referrals. The statutory language vests the referral power in 
the "head" of federal agencies, though subdelegation is not 
expressly forbidden. The real problem presented here is the 
extent of discretion which the agency can grant by contract to the 
collection firm regarding whether and when to refer claims to 
attorneys hired by Justice and to whom a reference for litigation 
can be made. The General Accounting Office urged that strict 
controls be placed on such referrals. 

One of the strongest arguments with respect to such direct 
referral was that, when it comes to collection efforts, the debtor 
will most likely respond to the request for payment by a 
collection agency if he or she knows that the lack of^ a prompt 
response will be met with prompt institution of suit. 
Requiring agency referral or agency consent to referral in all 
cases might undercut the effort of this legislation to give some 
bite to the prelitigation efforts at collection. It was also 
argued by the collection agency lobby that such firms could 
undertake much of the task of attorney supervision and monitoring 
that would otherwise cgg^ume the time of the federal agency to 
whom the debt is owed. These arguments seemed to be directed 
to establishing a relatively substantial role for collection 
agencies in the referral process with discretion perhaps vested 
there regarding when and to whom reference should be made. 



^^°See, e.g. , 132 Cong. Rec. S2986 (Sen. D'Amato) (daily ed. 
March 19, 1986). 

^^■•■H. Debt Report at 14. 

^^^S. Hearings at 122. 

2^^Id. at 142. 



CONTRACTING FOR LEGAL SERVICES 349 



254 
Despite these arguments, the Houses-Report and, perhaps to 

some lesser degree, the Senate Report suggest that the 



^^^H. Dept. Report at 5: 

In the situation where the agency chose 
to use a debt collection service, and the 
service was unable to collect the debt, the 
agency may then determine that private legal 
services are needed. In such a case, the 
agency itself must select the law firm to 
handle the debt, although the debt collection 
service may, pursuant to contract or agency 
direction, actually transfer the file to the 
law firm selected by the agency. In the case 
of such a decision, the debt collection 
service must return the entire file on the 
debt to the agency or transfer it at the 
agency's direction to the selected law firm. 

^^^S. Dept. Report at 9: 

In order to facilitate referrals, a 
federal agency may send its cases directly to 
private counsel that has been retained by the 
Department of Justice to handle such a case or 
class of cases. When claims of indebtedness 
are pending with a private collection agency 
under a contractual agreement, the federal 
agency head may direct those cases to be 
transferred from the collection agency to the 
approved private counsel. Such direct 
transferal of the case documentation and other 
information will facilitate timely litigation. 

This legislation does not prohibit an 
executive or legislative agency from including 
in its contract with a private collection 
agency a provision authorizing a collection 
agency to transfer prior-approved claims of 
indebtedness to a private counsel which has 
been retained by the Department of Justice to 
take legal action on the particular case or 
class of cases. (emphasis added) 

The underlined portion of the Senate Report could be 
construed to suggest that an agency may give advance approval of 
referrals, leaving it up to the collection agency to decide 
whether and when to refer. Since the House Bill was enacted in 
lieu of the Senate bill and the House Report (Sept. 27, 1986) was 
issued and available to the Senate at the time of the Senate's 
final action (Oct. 8, 1986), it can be argued that any difference 
between the two Reports should be resolved in favor of the House 



I 



350 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



principle role for the collection agency in attorney referral is 
limited to transferring the file to the attorney chosen by the 
agency. The decision to litigate and the choice of litigator must 
apparently be made by the agency. 

Whether or not cases are referred by the federal agency 
itself or by its collection agent, the power of compromising a 255 
claim or terminating an action remains with the federal agency. 
However the statute does not expressly forbid contractual 
provisions with attorneys granting them some discretion on these 
matters- as for example, where the debt may be relatively small in 
size. Otherwise the statute does not describe the type or 
degree of supervision over the activities of outside counsel, q 
expected of the referring agency or the Justice Department. 

c) Miscellaneous provisions . Contracts with attorneys for 
collection could justifiably contain various other provisions to 
protect both the interests of the government and the public. Some 
of those suggested during the legislative consideration of the 
amendments include agreements holding the government harmless from 
claims made by debtors (or others^qarising out of the efforts of 
private counsel to collect debts and/or requiring that g^ynsel 
have insurance to protect the government from such claims. 
Provisions permittina periodic auditing of the accounts of 
retained attorneys2^2 ^^^ segregated trust funds to hold 
government moneys, and prompt remittance of collections to the 



(continued from previous page) 

view. In fact the Senate "debate," when the House version was 
before it, seemed to accept the House approach. See 132 Cong. 
Rec. S15616 (collection agency "to transfer all the documents 
related to the claim to private counsel retained by the Attorney 
General to whom claims have been referred by the Federal agency 
should legal services be required") (statement of Sen. D'Amato). 

^^^Sec. 1(4), Pub. L. 99-578 (adding a new subsection 
3718(b)(5)(B)). 

^^^See H. Debt Report at 15 (letter of Acting Comptroller 



General ) 
268 



But see text at notes 246-47 supra 
^^^See S. Hearings at 32. 
2^0ld, at 81. 
"lid, 
^'^Id. at 88. 



CONTRACTING FOR LEGAL SERVICES 35 1 



273 
federal agency have been used in other contexts and seem 

equally applicable on the federal level. While the Debt 

Collection Amendments expressly make counsel subject to^various 

provisions of the Fair Debt Collection Practices Act, a 

contractual provision highlighting this fact along with the 

potential applicability of other federal and state laws2^elating 

to debt collection would seem particularly appropriate. 

Similarly, failure to comply with applicable standards of 

professional responsibility and conflict of interest regulations 

and prohibitions could be specifically referred to as a basis 

for contract termination. Finally, contract termination could be 

expressly authorized in the case where the contractor fails 

satisfactorily to pursue one or more claims where the contractor 

has been assigned responsibility for a whole class of debts. 

3. Selection Process . The legislative history clearly 
demonstrates that competition was to characterize the process of 
selection of attorneys for debt collection. The requirement 
that the Attorney General use his "best efforts" to obtain "at 
least four such contracts for legal services with private 
individuals or firms" in each judicial district chosen for the 
pilot program^was seen to be related in some way to ensuring 
competition. More significantly, the statute as finally 
enacted expressly provides that nothing in it "shall relieve the 
Attorney General of the competition requirements set forth in 
title III of the Federal Property and Administrative Services Act 
of 1949 (41 U.S. C. § 251 and following)." This provision 
evidences the assumption that the Competition in Contracting Act 
of 1984 applies to the procurement of the services of private 
attorneys generally and, in particular, the services of debt 
collection lawyers hired by Justice under this program. While 



273 

^^-^Id. at 81. 

^^"^15 U.S.C. §§ 1692 et seq. (1982). See Sec. 1(4), Pub. L. 
99-578 (adding a new subsection 13718(b)(6)). 

^^^Cf. 31 U.S.C. § 3718(a)(1)(B) (1982). 

276 

See text at note 454 infra. 

277 

See S. Hearings at 81 (which lists other conditions 

imposed by New York). 

27fl 

See S. Debt Report at 8; H. Debt Report at 4-5. 

280 

Sec. 1(4), Pub. L. 99-578 (adding a new siibsection 

3718(b)(1)(A)). 

^^-'"See text at notes 132-85 supra . 



352 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



282 
some of the exemptions from "full and open competition" might 

conceivably apply to some instances of retention of debt 

collection counsel, Congress seems to have assumed that 

generally the statutorily compelled competition procedures would 

be followed in the implementation of this program. The 

legislative history in the House is particularly emphatic on this 

point. Since the assumption seems to have been that, contacts 

awarded would not apply simply to one claim but many, the 

expense, including the delay, introduced by competitive procedures 

was presumably viewed as justifiable given the potential benefits, 

and this is, after all, only a pilot program. Some of the states 

which have used private attorneys for debt collection have 

eschewed competitive bidding, though New York has not and believes 

it has saved considerably in opting for that type of procurement 

process. 

While the statute focuses to some substantial extent on the 
type and magnitude of fee charged for collection services, it is 
clear that Congress did not believe that price alone should 
determine the selection of an^attorney for a contract. Thus, 
sealed bids are not required. The House Report noted that 
"[o]f course, these competition requirements do not mandate that 
the Attorney General always select the low bidder; he may consider 
such factors as experience in the field and previous performance 
in collecting debts in selecting firms for contracts." 
Similarly the Senate Report indicated that "the most important 
consideration in debt collection contracting should not be the 
contingency fee percentage, but rather, the net amount of dollars 
returned to the Government . " 

Accordingly while the Debt Collection Amendments do not lay 
down in detail the considerations deemed relevant to the selection 
of contractors, it was apparently expected the Justice would 
consider, along with proposed fee arrangements, the "experience. 



J 



See, e.g. , 41 U.S.C. § 253(c). 

283 

See text at notes 148-64 supra . 

284 

See S. Debt Report at 8; H. Debt Report at 5. 

^^^See, e.g. , H. Hearings at 64-69. 

^^^See S. Debt Report at 7. 

2ft7 

See S. Hearings at 35-41. 

^®®See 41 U.S.C. § 253(a)(2). 

OQQ 

H. Debt Report at 5. 

290 

S. Debt Report at 7. 



CONTRACTING FOR LEGAL SERVICES 353 



291 
skills, reputation and resources of the competing contractors." 

Specifically the Senate Committee on Governmental Affairs expects 

that: 

the Department will retain firms with debt 
collection experience, a trained collections 
staff, and the capability to handle a large 
volume of cases, which may require automated 
litigation support. The reputation of the law 
firm for responsible practices in the 
collection of consumer and commercial debts 
must also be considered. Attorneys selected 
should meet the highest ethical standards and 
be members in good standing in the state bar. 
The Committee would expect the Department to 
contact the American Bar Association, the 
Commercial Law League, and state and local bar 
associations, as well as creditors who have 
used law firms, to determine their 
reliability, 2£|covery rates, and 
performance . 

In addition to the foregoing considerations, the Debt 
Collection Amendments direct the Attorney General to "use his best 
efforts to enter into contracts . . . with law firms owned and 
controlled by2SQcially and economically disadvantaged 
individuals." Widespread advertising of the opportunity to 
compete for these contracts was seen as one way to |^|ure that 
such firms have an adequate opportunity to compete. Moreover, 
if such contracts are entered into, each agency must "use its best 
efforts to assure that not less than 10 percent of the amounts of 
all claims referred to private counsel by that agency are referred 
to law firms owned or controlled by socially and economically 
disadvantaged individuals . " 

In his signing statement accompanying the bill, the President 
noted his understanding that such "objectives will be pursued in a 
race-neutral manner with respect to the actual award of contracts, 
and that the criteria for identifying socially and economically 
disadvantaged contractors will not contain preferences or 



^^^Sec. 1(4), Pub. L. 99-578 (adding subsection 
3718(b)(1)(B)). 

P94 

S. Debt Report at 8 . 

^^^Sec. 1(4) Pub. L. 99-578 (adding subsection 3718(b)(3)). 



354 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



296 
presumptions based on race or ethnicity." The President also 

observed that " [i Implementation of these provisions in any other 

manner would be of doubtful constitutional validity because the 

goal is not premised on^findings of actual discrimination in the 

granting of contracts." 

The administration-supported bill proposed that judicial 
review of the procurement decisions of the^Justice Department 
under this program be expressly precluded. Such a provision 
does not appear in the final version and in fact the Senate Report 
expressly contemplates that such review would be available with 
Justice Department "criteriggand guidelines for selection" to 
guide the reviewing court. 

4. Program Reports . The Attorney General is required by the 
statute to annually report to Congress on the activities of the 
Department of Justice to recover indebtedness owed the United 
States, including not only its own litigation but that_conducted 
by private counsel retained under the pilot program. Moreover 
at the conclusion of the three year life-span of the program, the 
Comptroller General is required to conduct an audit of the actions 
of the Department of Justice under the statute, including the 
extent of the competition among private counsel to obtain 
contracts awarded, the reasonableness of the fees provided in 
those contracts, the efforts to retain the services of law firms 
owned and controlled by socially and economically disadvantaged 
individuals, and the results of private debt collection 
efforts.-^"-^ 

5 . Justice Department's Implementing Regulations . 

Implementing regulations required by the Debt Collection Act 
were adopted by the Department of Justice on June 18, 1987 with 
an effective date of August 31, 1987. While the Department 
anticipates that eventually additional rules regarding private 



296 

22 Weekly Compilation of Presidential Documents 1464 

(Nov. 3, 1986), reprinted in 1986 U.S. CODE CONG. & ADMIN. NEWS 

5619. 

297 

^^®See, e.g. , S. Hearings at 30-31. 

299 

S. Debt Report at 8. 

^°°Sec. 1(4), Pub. L. 99-578 (adding subsection 3718(c)). 

^^■'■Sec. 6, Pub. L. 99-578. 

^°^See 52 F.R. 24448 (July 1, 1987). 



CONTRACTING FOR LEGAL SERVICES 355 



303 
debt collection may be adopted, this initial set does very 

little to elaborate the content of the program. 

First of all, the Assistant Attorney General for 
Administration is delegated the authority to "develop and 
administer" the pilot program, including the establishment of 
policies and.procedures and entering into contracts with private ^ 
attorneys. Subdelegation of this authority is provided for. 
However the sole responsibility for designating the pilot ^oe 
districts apparently lies with this Assistant Attorney General. 

Secondly, United States Attorneys in the pilot districts must 
direct "the full cooperation and assistance of their respective 
offices in implementing the program." An Assistant United 
States Attorney in each district will be "responsible for 
assisting the contracting officer by supervising the work of the 
private counsel in their respective districts and providing 
necessary approvals with respect_tg the initiation or settlement 
of lawsuits or similar matters." 

The reference to "supervision" raises the specter^Qj personal 
service contracting and the issues implicated thereby. This 
part of the regulation is obviously refective of the 
constitutional and policy concerns regarding the vesting of 
litigation authority outside the government which have bedeviled 
the Department from the outset. At the same time the 
regulations do not indicate when "approvals" of initiation and 
settlement of suits are "necessary" or whether the "approvals" 
referred to are those of the Department of Justice or the agency 
with a claim against the debtor. In short the manner in which 
control over the efforts of private counsel is exercised has not 
been clarified to any substantial degree by the regulations, 
though apparently at the procurement stage the request for 
proposals will go into this matter in some detail. 

Finally, the regulations note that contracts for legal 
services for debt collection will be awarded "in accordance with 



^°^Id. at 24449 (28 C.F.R. § 11.1). 

^"^Id. (28 C.F.R. 5 11.2). 

308 

Id. (emphasis added). 

309 

See text at notes 115-16 supra . 

310 

See text at notes 55, 246 supra . 



356 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



competitive procurement procedures mandated by Federal law 
. . . . " They also indicate in a general way the manner in 
which participation in the debt collection program by law firms 
owned and controlled by socially, and economically disadvantaged 
individuals will be encouraged. 

C. Concluding General Observations 

In enacting the Debt Collection Amendments of 1986, Congress 
added to those comparatively rare instances where it has expressly 
authorized the use of private attorneys for litigation purposes. 
The limited nature of this program in terms of both its temporal 
and geographical scope along with the extensive reporting and 
auditing requirements evidence Congressional awareness of the 
potential risks, at least in the area of debt collection, which 
are posed to both governmental and private interests by widespread 
reliance on outside litigation counsel. The controls on the 
activities of the attorneys hired which are mandated by the 
statute or imposed by agency regulation and practice will 
hopefully mitigate these prgblems as well as moot any potential 
constitutional challenge. At the same time, however, the 
degree of control^pjovided may subject these attorneys to some 
regulation by 0PM and, as we shall see, bring them within the 
coverage of the federal conflict of interest statutes. 

The legislative history of the Amendments indicates 
Congressional awareness that in the area of legal services 
contracting, an agency may, and perhaps should in most cases, be 
guided not merely by the lowest price available but by other less 
easily quantifiable considerations. At the same time. Congress 
has made it clear that competitive procurement of services should 
be the rule and not the exception even with regard to attorneys . 

Finally, the program established by the Amendments in effect 
represents a congressional judgment that it may in some instances 
be more §Q|t effective to use private counsel than government 
lawyers. One of the alternatives in 1986 was to appropriate 
additional funds to expand the staffs of the various United States 
Attorneys offices sufficiently to handle the debt collection 
effort entirely in-house, an approach that apparently even the 
Department of Justice did not seriously advocate. Because of 



311 



312 



313 



314 



315 



316 



52 F.R. 24449 (28 C.F.R. § 11.3). 



Id. 



See text at notes 8-15 supra . 
See text at notes 115-16 supra . 
See text at note 454 supra . 
See , e.g. , S. Hearings at 19. 



I 



CONTRACTING FOR LEGAL SERVICES 357 



various factors, including the expertise of collection attorneys, 
the choice was made that "privatization" should be seriously 
pursued, if only on a trial basis. 

V. Agency Use of Outside Counsel: A Survey 

This survey of agency use of outside counsel to perfonn legal 
services is based on a variety of sources. First of a^J^ several 
years ago, pursuant to the Freedom of Information Act, The 
National Law Journal filed requests with various agencies for 
documentation related to this issue. The materials which were 
furnished in response to these requests were examined for this 
study, though they were somewhat dated at the time this report was 
prepared. In order to obtain more complete and current 
information, the Administrative Conference directed a 
questionnaire to several agencies including the Departments of 



^-'•'^5 U.S.C. § 552 (1982). 
318 

Administrative Conference of the United States 
Survey of Government Use of Private Attorneys 

Agency/Department: 

Hiring or contracting office: General Counsel or Solicitor 

Other agency office (specify) 



(If hiring or contracting was by an office other than the 
agency's legal office, please indicate below what role, if 
any, the agency's legal office has in the decision to seek 
outside counsel or to use the particular attorney. ) 



Name of attorney or firm 
Location 



Relationship of attorney with agency: Contractor Subcontractor 

Special Government Employee Other (specify) 

Period covered by contract or employment 

Fee paid per hour $ Total number of hours worked 

Was the fee less than the normal rate in that location? 

Was the fee less than the normal rate for that attorney or firm? 
(If yes to either question, please explain below.) 

What was the statutory authority for hiring or contracting with 
the attorney? 



Why did the agency choose to use an outside attorney' 



358 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Transportation, Interior, Housing and Urban Development, the 
Environmental Protection Agency and the Veterans Administration. 
The responses to this were analyzed. -, Finally various interviews 
were conducted with agency officials as well as attorneys 
who have worked under contract with the government. The results 
of this survey follow. 



(continued from previous page) 



Did the agency follow the provisions of the Competition in 
Contracting Act? 

How were competitive bids sought? (If exempt from the Act, 

please explain. ) 



How did the agency determine that the attorney had no conflict 
of interest? 



General description of work to be performed: 



Remarks 



319 

The author interviewed officials of the Federal Deposit 

Insurance Corporation and the Federal Home Loan Bank Board, among 

other agencies. The law firm of Wolf, Block, Schorr and 

Solis-Cohen, the prior consultant on this study of federal agency 

use of private attorneys, condiicted other interviews of officials, 

the findings of which are referenced, where appropriate, in the 

footnotes to Appendix A to this report (though the specific 

interviewee is not named in this Report, only a reference to the 

relevant page of the Wolf Block Report). In addition, ACUS held a 

public hearing (hereinafter "ACUS Hearing") on May 26, 1986 at 

which various officials testified. Where information from that 

hearing is relied upon, the footnotes to Appendix A so indicate. 

^^^The prior consultant. Wolf, Block, Schorr and Solis-Cohen, 
conducted these interviews, the substance of which is contained in 
its draft report. 



CONTRACTING FOR LEGAL SERVICES 359 



In view of the fact that currently the largest consumers of 
private attorney services among federal agencies are the Federal 
Deposit Insurance Corporation and the Federal Savings and Loan 
Insurance Corporation and that more detailed information was 
available regarding their practices than those of other agencies, 
the following descriptions of their use of private attorneys are 
relatively elaborate. While the situation confronting other 
agencies may be unique in one or more ways, the experience of the 
FDIC and the FSLIC may be a source of guidance for them where 
appropriate. 

The time constraints applicable to the preparation of this 
report precluded an in-depth examination of the practices of these 
other agencies . Moreover it appears that record-keeping with 
regard to the use of outside counsel is not always provided for in 
such a manner that it is relatively easy to identify the exact 
scope and nature of all legal work which has been contracted out. 
Available statistics on non-banking agencies is, therefore, 
somewhat sketchy. Nevertheless the existing data conveys a 
general sense of the scope of use of outside counsel throughout 
the federal government. In addition that data provides other 
significant insights into agency practices with regard to 
retaining private attorneys. Accordingly, following the 
discussion of the FDIC and the FSLIC, a general overview of the 
situation in the rest of the government is provided along with 
Appendices A, A-1 and A-2 which summarize the information 
available with regard to specific agencies. 

A. Federal Deposit Insurance Corporation 

1. Background . The Federal Deposit Insurance Corporation 
functions in two distinct capacities: first of all, as the 
insurer of deposits and the primary federal regulator of 
state-chartered banks which are not members of the Federal Reserve 
System, and secondly, as receiver or liquidator of insured banks 
that have failed. From its origin in 1933, the FDIC has 
retained private attorneys in connection wit.h2the liquidation of 
assets acquired from closed, insured banks. By statute the 
Corporation has the authority "to make contracts," "to sue and be 
sued," "to act as receiver," "to prescribe . . . rules and 
regulations," and "to exercise . . . such incidental powers as 



321 

Memorandum to Honorable Doug Barnard, Jr., Chairman, 

Commerce, Consumer and Monetary Affairs Subcommittee, Committee on 

Government Operations, U.S. House of Representatives (March 15, 

1985) (hereinafter "Barnard Memorandum") at 1. 

322 

Interview with Thomas A. Rose, Deputy General Counsel and 

Carroll R. Shifflett, Assistant General Counsel, FDIC on March 12, 

1987 (hereinafter "FDIC Interview"). 



360 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



323 
shall be necessary to carry out the powers . . . granted." 

These are the provisions apparently relied upon as a basis for the 

retention„of private attorneys for litigation and other 

purposes. In fact in one unreported opinion, a challenge to 

the authority of the FDIC to use private attorneyScto collect 

debts was rejected on the basis of this statute. 

In recent years almost all of the legal services for the FDIC 
by outside counsel have been performed in connection with failed 
banks and the FDIC's receivership and liquidation activities and 
in connection with assistance transactions involving failing or 
potentially failing banks. At the end of January 1987, there 
were 28,860 of those types of cases; 13,557 of which were being 
handled in-house by the Corporation's employees. Contract 
attorneys were in charge of 13,940 cases and another 1363 were 
considered "joint", that is inside and outside counsel formed a 
"team" for their management. On a percentage basis, more 
litigation is currently being handled by FDIC employees than at 
any time in the agency's history. In terms of expenditures for 
legal fees related to receivership and assistance transactions, 
the Corporation paid $7,586,957, $9,368,412, $21,341,407, 
$26,603,645, $37 , 232 ,449^Qand $45,008,440 in the fiscal years 
1981-1986 respectively. 

In the FDIC's status as receiver or liquidator, outside 
counsel engage in a variety of types of legal work: loan 
restructurings, collection suits, foreclosure actions, bankruptcy 
matters, claims based on bankers' blanket bonds, and defensive 
litigation usually involving claims against a failed bank which 
the FDIC, as receiver or liquidator, is obligated to defend. The 
Corporation has also engaged outside counsel on legal matters 
relating to potentially failing banks and in connection with 
open-bank assistance transactions, such as FDIC-assisted mergers 
and the Continental Illinois assistance transaction. The most 
common reason for seeking outside assistance is not the need for 



^^^12 U.S.C. § 1819 (1982). 

■^^"^FDIC Interview. 

^^^FDIC V. Barrasso, Case No. 82-725-Civ. -T-GC (U.S. Dist. 
Ct., M. Dist. Fla., Tampa Div. , March 22, 1983) (relying on the 
power of Board of Directors to prescribe rules and regulations) 

3 ? 6 

Barnard Memorandum at 1. 

^^^FDIC Interview. 

^^^FDIC Interview. 

330 

Barnard Memorandum at 6-7. 



CONTRACTING FOR LEGAL SERVICES 361 



special expertise, though that may be a factor in some cases, but 
rather the lack of manpower in the agency to^bandle all legal 
matters in which the FDIC becomes involved. 

In order to increase its capacity to handle matters in-house, 
the Corporation has dramatically increased its lawyer-employees 
from approximately 40 in 1982 to 313 nationwide today. The 
Legal Division was reorganized in 1984 as B^^t of an overall 
decentralization of the FDIC's operations. In May, 1987, 
seventy-nine full-time attorneys worked at the Corporation's 
Washington office, thirty- four of whom dealt with legal problems 
associated with the FDIC's liquidation and receivership functions. 
The Regional and Corporate Affairs Branch is responsible for legal 
services provided in the agency's six regional .of f ices to support 
both supervisory and liquidation activities. Seventy-eight 
full-time attorneys now staff the regional offices, sixty of whom 
handle liquidation matters. Some of the FDIC's newly hired 
lawyers are employed under special hiring authority providing for 
one year renewable appointments . There are currently one hundred 
and fifty-six of these so-called "liquidation-graded" attorneys. 
These lawyers work at field site offices. This type of hiring 
authority permits the Corporation to meet its short and 
intermediate ter^^weeds without taking on the burden of additional 
permanent staff. 

Since the predominant use of outside counsel is in the area 
of the FDIC's capacity as receiver or liquidator, it is important 
to note how the fees for these services are paid. Expenses from 
collection efforts (including allocable FDIC personnel costs for 
its lawyer-employees) are paid from the proceeds of the 
collections or absorbed by the Permanent Insu^^gce Fund created by 
assessments on the deposits of insured banks. Appropriated 
funds are not involved. Moreover, since the proceeds of 
collections and other actions benefit private parties and not the 
United States Treasury, the Department of Justice has suggested 



331 

FDIC Interview. See also Barnard Memorandum at 7 ("volume 

of bank failures is probably the most dominant" reason for going 

outside) . 

^^^FDIC Interview. 

333 

Barnard Memorandum at 4. 

"Sid, 

^^^Id. at 3-4. 

^■^^FDIC Interview. 



362 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



that it would be inappropriate for the United States itself-to pay 
for the services through representation by the Department. 

2. Written Guidance . The FDIC has rather elaborate written 
guidance applicable to the hiring of outside counsel. The purely 
internal directives set forth criteria for the selection of 
outside counsel, considerations to be considered in negotiation 
of th|^£ee, questions to be kept in mind in reviewing a fee 
bill, and general directions regarding how to handle problems 
arising in the relationship between the FDIC and the outside 
counsel. Some of these documents, such as the criteria for 
choos^M an attorney, are similar to those found in the corporate 
area. Others, such as the fee bill checklist, had no 
counterparts — at least in the degree of detail and insight — among 
the corporate materials examined as part of this study. While 
some of these documents may appear to state the obvious (again the 
criteria for choice document is arguably an example of this), the 
guidance is a training tool for new^employees and may help to "jog 
the memory in appropriate cases." 

Aside from internal policies, the FDIC has incorporated its 
restrictions and expectations with regard to the activity of 
outside counsel in connection with bank liquidation matters in an 
elaborate employment of counsel letter which will soon be replaced 



338 

Barnard Memorandum at 4. 

339 

These include the repute of the attorney or firm in the 

legal profession and in the locality served; the experience of the 

attorney or firm in the type of legal work required or expected; 

the ability of the attorney or firm to handle the anticipated 

volume of work; the geographic location of the attorney or firm; 

whether the fee rates are reasonable; whether the attorney or firm 

can make available an adequate number of attorneys to handle 

related matters of a routine or less important nature and at a 

lower fee rate; possible conflicts of interest; the degree of 

cooperation expected; the responsiveness to the FDIC's needs to be 

kept informed; and whether the FDIC is a major client of the firm. 

340 

These include the volume of work directed at the firm and 

the treatment of various expenses such as Lexis, typing, filing 

and secretarial overtime. 

341 

For example, has FDIC been credited for the "learning 

curve" when the firm shifts attorneys for its own purposes; was 

there excessive senior attorney review or excessive paralegal 

time; did some attorneys regularly bill 6-8 hours a day; are there 

excessive reviews of file or status reports; are continuances on 

behalf of FDIC requested because the firm is not ready? 

342 

See text following note 30 supra . 

343 

FDIC Interview. 



CONTRACTING FOR LEGAL SERVICES 363 



to some degree by a "Guide for Legal Representation" to be 
distributed to all attorneys, both full- and part-time employees 
and outside counsel. For clarity of presentation most of the 
matters covered in these documents are discussed separately below. 
It should be noted here, however, that the "Guide" stresses the 
FDIC's desire to obtain "quality legal^tepresentation in a timely, 
efficient and cost-effective manner." The outside attorney is 
also reminded that the Corporation "places great importance on the 
professional skills and conduct of all attorneys representing" it 
and that its status as a public instrumentality "mandates that our 
attorneys, whether inside or outside, demonstrate the ^^ghest 
standards of ethics, professionalism, and competence." 

3. Procurement Procedures . Apparently the FDIC is not 
subject to the civil service regime as a matter of law but^^^s 
brought itself under its strictures as a matter of policy. 
Among other things, this would appear to mean that the distinction 
between "personal" and "non-personal" services contracts which has 
such significance for other ggvernmental entities in their 
procurement of services has, at the least, diminished 
significance in the case of this Corporation. Neither the 
internal directives nor the employment-related documents supplied 
outside counsel make a point of identifying the attorney as an 
"independent contractor." All this means that the FDIC can 
legally exercise substantial supervision over the efforts of 
outside counsel without undue concern for unwittingly bringing the 
contractual relationship within the regulatory jurisdiction of the 
0PM. ASoWill be seen, in fact the FDIC often exerts such close 
control. -^^^ 

Secondly, as a "mixed ownership" corporation, the^gglC is not 
subject to the Competition in Contracting Act of 1984. This 
does not mean, however, that the agency does not attempt to 
conduct its procurement in a manner which may achieve much the 
same purposes as that legislation. When time and circumstances 
permit, three or four firms are identified and contacted in order 



344 

FDIC Interview. 

^^^Federal Deposit Insurance Corporation Guide for Legal 
Representation (hereinafter "FDIC Guide") at 1. 

^^^Guide at 2. 

-^^"^FDIC Interview. 

-^^^See text at notes 44-83 supra . 

^^^See text at notes 357-80 infra . 

^^^See text at note 141 supra . See also Letter of Michael B. 
Burgee, Deputy General Counsel to Marshall J. Breger, ACUS 
Chairman (Nov. 10, 1986). 



364 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



to determine their interest in representing the agency. 
Representatives of the firms are interviewed with regard to 
their fees and other-matters including those covered by the 
"criteria" document. Evaluation of the responses may narrow 
the field to one or two. Then those lawyers who will actually 
perform the work are interviewed. This process has even been 
utilized when the agency has not been dissatisfied with a firm but 
merely^to insure that it is getting the best services for the best 
price. 

Given the^iwmediate need for counsel in cases of unexpected 
bank failures, as well as the desire to avoid advance publicity 
of potential failures and the inevitable public reaction, full and 
open competition within the meaning of the CICA may simply not be 
feasible for the FDIC in many instances. 

4. Case Management, Supervision and Control . It is the 
policy of the FDIC "that attorneys in its Legal Division should 
always be responsible for managing any legal assignment or 
litigation,_even though a matter has been referred to outside 
counsel." Therefore an FDIC attorney's approval is required 
for "all major strategic or tactical decisions," g at least where 
a case involves important issues or large sums. The degree of 
FDIC involvement in a case varies in practice from instances where 
a "joint" approach is taken and substantial control resides in the 
Corporation to "routine" matters requiring relatively little 
overall supervision. The degree of involvement may vary 
depending on the extent ofogxperience with and trust in the 
attorney or firm retained. 



FDIC Interview. 

352 

See note 339 supra . 

353 

■^^•^FDIC Interview. 

^^^Id, 

356 

See also text at notes 417-18 infra . 

357 

"^^'fDIC Guide at 2. 

^^^Id. at 2. 

359 

Id. at 2. See also FDIC Interview. 

360 

Guide at 2. See also FDIC Interview. 
^^■•■FDIC Interview. 



A 



CONTRACTING FOR LEGAL SERVICES 365 

At the outset of a referral of a case, the FDIC attorney 
assigned the matter develops with the outside counsel a "case 
plan" which covers, inter alia, anticipated discovery, the 
issues requiring researc^, and a strategy of achieving a 
negotiated settlement. In addition counsel is asked for an 
initial assessment of the likely outcome of litigation, time 
required tp.conclude the matter and fees and expenses to be 
incurred. A litigation budget may be drafted. Compliance 
with the case plan and budget, as initially agreed upon or ^§^er 
modified, is monitored closely as a cost control technique. 
Particularly at the beginning of the relationship with outside 
counsel, pleadings and other filingSgmay be reviewed by the FDIC 
attorney in charge prior to filing. Correspondence and other 
documentation, whether-from retained or opposing counsel, are also 
forwarded to the FDIC."^^" 

Retained attorneys are given a variety of instructions 
regarding their conduct of the case in the written guidance 
documents supplied by the FDIC. Specifically outside counsel are 
advised to avoid multiple representation of the firm at meetings 
or depositions, rotating lawyers knowledgeable about FDIC matters 
and using FDIC work to train personnel. To avoid costly 
duplication of research efforts, the FDIC has a "bri^^^bank" which 
contains the results of all major research projects. These 
documents are made available to outside counsel, who is, 
accordingly, cautioned not to embark on a significant research 
project until it has been determined whether the materials in the 
brief bank contain relevant information. There are certain 



■^^^FDIC Guide at 2. 



363j 
364, 



Employment of Counsel Letter at p. 2. See also FDIC Guide 
at 8. 



Employment of Counsel Letter at 2. See also FDIC Guide at 
9. 

•^^ ^Employment of Counsel Letter at 2. See also FDIC Guide at 



FDIC Guide at 3 , 9. 



9. 

366 

^^^Employment of Counsel letters at 2. See also FDIC Guide 
at 10. 

^^^Employment of Counsel Letter at 3. See also FDIC Guide at 
10. 

369 

FDIC Guide at 4. 

"4d. 



366 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



legal issues of special interest to the Corporation because, for 
example, of the need for a nationwide approach. Counsel are 
directed to contact FDIC staff before researching or drafting on 
these issues. Relevant research or statements of agency policy 
may be provided counsel or the FDIC may take over the part of ^| 
case raising issues of particular interest to the Corporation. 
In areas of the country where FDIC has an office, as a cost 
control mechanism or for other reasons, the Corporation's 
legal staff may take over discovery or other projects. 

In addition, retained counsel are advised regarding various 
aspects of FDIC's litigation and settlement philosophy and 
procedures. Specifically, attorneys are told that the Corporation 
does not want to take extreme positions unlikely to have a 
substantive impact on litigation and that coercive, delaying or 
obstructive tactics should be avoided. -77^^^^^ possible, cases 
should be settled at a very early stage. All settlement offers 
must be immediately reported to the FDIC attorney in charge. 
Finally counsel is directed to be alert to opportunity^! for 
utilizing non- judicial dispute resolution approaches. 

Upon the filing of the complaint or answer, the outside 
counsel must submit a "commencement of action" report which 
includes the docket number, claim amount, the statute of 
limitations date, and the date the complaint was filed, among 
other things. Along with fee bills, counsel must quarterly file 
written "status reports" which include the next hearing date, the 
current estimated cost of litigation, the current success ratio, 
current estimated time of completion, cumulative fees and 
expenses, and estimate of judgment size and collectibility. Where 
a litigation budget exists, counsel is requested to review it in 
connection with these reports and, if the cost of any significant 
budget item is expected to increase by more than 10%, counsel must 
contact the FDIC attorney in charge to discuss Jgg reasons for the 
increase and the alternative courses of action. 



372id. 








"3ld. 








"4ld. 


at 


5. 




"SpDIC 


Interview 


"^FDIC 


' Guide 


at 


3"ld. 


at 


6. 




378i<a. 


at 


6. 




3"id. 


at 


6. 





^^°Id. at 9-10 



CONTRACTING FOR LEGAL SERVICES 367 



5. Fees . Since the FDIC wants to "maximize recovery and 
minimize the expense," it does not always require that a fee be 
based on an hourly rate or a contingency. Rather a variety of fee 
arrangements are possible. The Corporation wants to retain its^g-j^ 
ability to choose the option that is best in the circumstance^Q2 
Often firms give the FDIC a discount from their normal rates. 

It is the total cost of legal services and the results achieved 
that is generally viewed as more important than mere rate of 
compensation. 

Apparently the Corporation makes it clear to retained counsel 
that a case should be handled by the member of a firm who is bgjh 
capable of an adequate job and yet billed at the lowest rate. 
Fee bills are to be submitted on a quarterly basis and are to 
include the date(s) of service, name(s) of the individual service 
provider(s), descriptions(s) of service(s), time(s) billed for 
service, hourly rates, expenses billed, and total hours and 
expenses billed on the case. 

6. Conflicts of Interest . Outside counsel are informed that 
the FDIC expects "the highestgCthical standards in [their] 
representation of the FDIC." At the time of his or her 
retention, the attorney (or firm) must provide the Corporation 
with a list of potentially conflicting representations. 
Thereafter any potential conflict must be discussed with the FDIC 
as soon as its existence is recognized. The Corporation retains 
the rightyto determine whether an actual or potential conflict 
exists. The conflicts referred to include those covered by the 
"Code of Professional Responsibility and applicable federal or 
state provisions." The Guide, therefore, does not clearly 
answer the question whether (or when) retained attorneys are 
subject to federal conflict of interest law contained in Title 18 



^^■'■FDIC Interview. 

383 

Barnard Memorandum at 11. 

^®^FDIC Guide at 12-13. 
386id, at 3. 



368 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



389 
of the United States Code. It does not impose those standards 

regardless of their applicability of their own force. 

The FDIC currently has a "conflicts committee" to deal with 
conflicts issues as they arise and to help avoid theigQtreatment 
on a purely ad hoc, potentially inconsistent, basis. It may 
also produce clearer guidelines for future use. 

7 . Tracking and Evaluation of Outside Counsel Program . The 
initial and subsequent status reports, along with the quarterly 
fee bills, provide information that is computer-accessible. As 
such, it can support an elaborate method of tracking both 
individual matters and the general flow of litigation for cost 
control and other purposes . 

There is also an "outside counsel working group" made up of 
in-house attorneys and an outside consultant to evaluate the use 
of private attorneys by the FDIC and to suggest improvements ig^ 
the general system or even to offer advice on specific cases. 
The Guide itself was a product of its efforts. In addition 
meetings are held involving agency in-house attorneys both from 
Washington and the regions for training and discussion purposes 
related to the retention of outside counsel. 

The FDIC's experience with hiring outside counsel since 1933, 
and particularly after the current rash of bank failures began in 
the early 1980 's, appears to dwarf that of many (or most) private 
corporations. That experience is clearly reflected in the 
elaborate memorialization of procedures, policies, criteria and 
approaches. In fact the agency may deem itself more "expert" in 
this area than most other entities^ .public or private, and that 
those have much to learn from it. The Corporation is not free 
from criticism by its legal contractors, though that criticism may 



389 

It would appear, however, that the conflict of interest 

provisions contained in 18 U.S. C. §§ 202 et seq. (1982) do apply 

to the FDIC. See , e.g. , 5 U.S.C. § 105 (1982) ("executive agency" 

means a government corporation); 18 U.S.C. § 6 ("agency" includes 

government corporations); 18 U.S.C. § 205 (employees of "executive 

branch" and "agency"). Only "employees" are covered but, given 

the control exercised over at least some FDIC outside counsel, it 

is an open question whether they are not also subject to Title 18. 

See text at notes 446-54 infra. 

390 

FDIC Interview. 



CONTRACTING FOR LEGAL SERVICES 369 



not be repeated in the future in all respects given recent changes 
evidenced by the production of the Guide and higher staffing 
levels. In the past the following problems have been identified 
by outside counsel: weak supervision, frequent turnover of agency 
personnel requiring re-education regarding pending cases, delay in 
paying bills, elaborate billing and reporting ^|guirements, and 
lack of coordination among supervisory groups. The FDIC has 
admitted that such complaints have been levelled at it and that 
some problems may exist, though the Corporation does not always 
see the identified concerns as "problems" but necessary^^gf-shoots 
of its need to control costs and protect its interests. 

B. Federal Home Loan Bank Board and the Federal Savings and Loan 
Insurance Corporation 

The Federal Home Loan Bank Board is the operating head of the 
Federal Savings and Loan Insurance Corporation. The former is 
organized in various offices including the Office of the FSLIC and 
the Office of the General Counsel, which itself contains divisions 
which provide in-house legal services to the FSLIC. The services 
of outside counsel have, on rare occasions, been retained for 
operations of the Board other than those regarding the statutory 
duties of the FSLIC. Otherwise almost all of the legal ^^^k 
contracted out has involved the operations of the FSLIC. For 
statutory authority to hire attorneys, the FSLIC relies^^g part on 
the power to "make contracts" and to "sue and be sued." 

It may be helpful at the outset to compare and contrast the 
situation at the FSLIC with that at the FDIC. First of all, while 
the FSLIC is the second largest consumer of privat^g^egal services 
in the federal government based on available data, it spends 
far less than the FDIC. For example, in 1986 the FDIC spent 
approximately $45 million for such |ggvices while the FSLIC spent 
in the neighborhood of $15 million. 



^^^See Wolf Block Report at 101-114. 

^^^See ACUS Hearing at 113-14, 117-119 (testimony of Michael 
B. Burgee, Deputy General Counsel, FDIC). 

^^"^ Interviews with Ronald Oberle, Associate General Counsel 
for Contracting and Procurement Law, Office of General Counsel, 
FHLBB on March 12, 1987 and May 15, 1987 (hereinafter "FHLBB 
Interview" ) . 

^^®12 U.S.C. § 1725(c) (1982). See also 5 U.S.C. § 3109 
(1982). 

■^^^See National Law Journal , Feb. 4, 1985 at 1, col. 3. 
"^^^FHLBB Interview. 



370 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Moreover, the dominant reason given for seeking outside 
assistance is different. The FDIC explains its use of private 
attorneys largely as a matter of lack of staff resources to handle 
the volume of legal work, not the lack of "expertise." On the 
other hand, the FSLIC's contracting is required bv^the need for 
"expertise" with respect to issues of local law. In terms of 
in-house legal resources the FDIC with over 300 attorneys staffing 
both Washington, regional and site offices far outdistances the 
Board with approximately 100 who work in Washington. 

Furthermore, written memorialization of the practices 
relating to retaining and controlling outside counsel and the 
directions to them is more extensive at the FDIC. 

In addition, apparently the degree of control exercised by 
the FDIC over the conduct of litigation by outside counsel is 
significantly greater in ^gSY o^ most instances than the control 
relied upon by the FSLIC. While the FDIC is not by law subject 
to the civil service regime and, therefore, less likely to concern 
itself with the legal issues presented by the distinction between 
"personal" and "non-personal" services contracts, the Board and 
FSLIC are under the jurisdiction of the 0PM and the civil 
service regime and in fact are very aware^of the restrictions 
applicable in the personal services area. The FSLIC's legal 
services contracts are clear with regard to the fact that the 
attorney is operating as an independent contractor with only 
general direction exercised by FSLIC employees. To the extent 
that the efforts of the FSLIC in its receivership capacity impact 
most directly and immediately on private interests and not public 
interests, perhaps this degree of control is justifiable, 
though apparently the FDIC does not so view its obligations in 
dealing with its outside counsel in a somewhat similar context. 



403 

During 1987, the FSLIC prepared a more extensive written 

memorialization of its practices than had existed previously. 

404 

FHLBB Interview. 

405 

See text at notes 347-49 supra . 

Except, perhaps, in its receivership capacity. 

407 

FHLBB Interview. 

^°®While the efforts of the FSLIC and the FDIC with regard to 
troubled institutions redound directly to the benefit of private 
parties, ultimately there are large public interests at stake that 
justified in the first place Congressional authorization of the 
programs which these corporations now administer. 



CONTRACTING FOR LEGAL SERVICES 371 



With regard to procurement procedures, legally speaking the 
FSLIC and the FDIC find themselves in somewhat different 
situations. As a mixed-ownership government corporation, the FDIC 
is not subject to the Competition in Contracting Act. On the 
other hand, the FSLIC is a wholly owned government corporation and 
subject to the Act with respect to at least its insurance and 
supervisory functions, though perhaps not when it acts as receiver 
or liquidator. Legal fees for the latter functions at both the 
FDIC and the FSLIC are initially charged against the estate of the 
failed bank or thrift institution. However, the insurance fund 
that may absorb some of these charges is technically different, 
with the FSLIC 's considered appropriated and the FDIC's 
non-appropriated funds. 

Despite these differences, the procurement procedures 
followed by both entities are not all that far apart in many 
cases. For one thing while in the case of the FSLIC, it is 
subject to the CICA with regard to certain of its functions, that 
statute contains an "urgency" exception which allows the FSLIC 
to dispense with many of the more formal competitive requirements 
of the CICA given t^e need to act quickly on the failure of a 
thrift institution. In such circumstances the CICA requires 
that the FSLIC "request offers from as many potential sources as 
is practicable under the circumstances . " Even when acting as 
receiver or liquidator and arguably not subject to CICA, employees 
of the FSLIC prior to retaining outside counsel for a particular 
matter are directed to contact several firms to solicit their 
interest, discuss possible fee arrangements, potential conflicts 
of interest, and other matters of concern to the FSLIC. Enough 
firms must be contacted to identify at least three firms without 
conflicts of interest, willing to propose to do the work, and 
technically qualified to perform the seirvices. Such firms are 
compared "on technical and cost bases" and the proposal "most 
advantageous to government^^price and other factors considered" is 
recommended for selection. As noted previously, such informal 



409 

See text at note 141 supra . 

"^■"■^FKLBB Interview. 

^llld, 

412 

See text at note 150 supra . 

^■"■^FHLBB Interview. 

414 

^■^^41 U.S.C. § 253(e) (Supp. Ill 1985). 

415 

FHLBB Guide to Formation and Administration of Legal 

Services Contracts. 



372 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



416 
competitive procedures are often found at the FDIC. As in the 

case of the FDIC, widespread solicitation of proposals, which may- 
be required by Title 41, would create such problems for a 
potentially failing thrift institution and other interested 
persons that as a practical matter |,more flexible procurement 
process is dictated in many instances. One FHLBB official 
interviewed indicated his emphatic view, however, that some form 
of competition does save substantially in costs of legal services 
for the government where the decision has been made to contract 
out. -^^ 

It should be noted that with regard to certain procurements 
for legal services (e.g. mergers and acquisitions), the FSLIC does 
provide the full and open competition mandated by the CICA. Such 
competition may consume at least two and one half to three months 
from the „ commencement of the required procedures to the contract 
award. *^" 

Finally, the tracking systems of the FDIC for the purposes of 
cost control and case management are computerized and largely in 
place. This was not the case as of September 1, 1987 with the 
FSLIC, though it was expected to have a Legal Information 
Management System similar to the FDIC's on line in the near 
future.^^-^ 

Having surveyed these matters, much of the picture of the 
FSLIC as a consumer of legal services has been drawn. 
Nevertheless certain additional information should be noted. 

1. Written Documentation of Practices . Other than written 
solicitations issued relating to particular procurements of legal 
services in the case of mergers and acquisitions where "full and 
open competitive" procedures are utilized, the principal documents 
that currently exist relating to the FSLIC retention of outside 
counsel include a Guide to the Formation and Administration of 
Legal Services Contracts, a checklist for negotiating legal 
services contracts, a "contact" form memorializing discussions 
with attorneys or firms contacted as part of the informal 
solicitation of proposals, an internal form memorandum requesting 



416 

See text at notes 350-54 supra . 

417 

See text at notes 355-56 supra . 

4.1 ft 

See also 41 U.S. C. § 253(c)(7) (public interest exception 
to CICA but requiring notification to Congress not less than 30 
days before award of the contract). 

419 

FHLBB Interview. 



CONTRACTING FOR LEGAL SERVICES 373 



approval of the retention of a particular attorney or firm, and 
the formal contract with attachments. 

The Guide describes in general the method of source selection 
(including issues to be discussed with firms contacted), internal 
agency process for contract approval and.matters related t223 
contract administration and negotiation. A "checklist" and 
"contact" form are prepared for each firm contacted and list 
information that should be conveyed to outsiders regarding FSLIC 
practices (such as its billing procedures) and information to be 
collected from firms (such as firm expertise and^hpurly rates 
charged). The memorandum "request for contract" is prepared 
for each contract proposed by agency staff for approval by the 
FSLIC 's contracting officers and includes information such as how 
many firms were contacted, the name of the firm recommended to 
provide the services, projected billings, the reasons for the 
firm's selection and the scope of work to be done. 

2. Types of Legal Services . Outside counsel perform the 
bulk of legal work required when the FSLIC becomes involved with a 
troubled thrift institution. This may include litigation pending 
in favor or against the institution, reorganizations, transfers of 
assets and other work related to the receivership. The FSLIC may 
provide financial and other assistance directly to the problem 
institution before failure or may seek to facilitate an 
acquisition of a troubled thrift by providing such assistance. 
Contract lawyers may prepare all documents for the proposed 
transaction and assist in negotiation of the assistance agreement. 

3. Criteria for Selecting a Firm . Where the competition 
requirements of the CICA are followed, the FSLIC must set forjh in 
writing the factors it will consider in evaluating proposals. 

For example in soliciting proposals for firms to contract with the 
FSLIC to perform work relating to assistance transactions, the 
Corporation required a Washington, D.C. office, significant 
experience with large, complex transactions such as mergers and 
acquisitions, the ability to work cooperatively with Board 
personnel, no conflicts of interest, and the willingness to commit 
to bill at stated hourly rates for a minimum of one year. Such 



422 

Letter from Ronald J. Oberle, Associate General Counsel, 

FSLIC to author (dated Sept. 14, 1987). 

426 

See text at note 165 supra . 



374 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



concerns are similar to thg^^ found in the case of the FDIC's 
choice of outside counsel. 

428 
In addition the FSLIC Guide indicates generally the 

factors considered by the agency in retaining counsel whose 

services relate to receiverships and other matters. These include 

the absence of conflicts of interest, geographic proximity to the 

troubled thrift institution, technical qualifications to perform 

the services, and price. 

4. Contractual Undertakings by Outside Counsel . As noted 
previously, one of the principal documents relating to retention 
of outside counsel is a form contract. It is intended to 
memorialize various understandings between the FSLIC and the 
service provider. 

The contractor is advised that it is to provide the services 
in accordance with directions given by the General Counsel's 
Office and under the general direction of the General Counsel. 
The contractor is also told to promptly advise the FSLIC regarding 
any matter that may give rise to a conflict of interest or other 
ethical bar to representation. The document indicates that the 
contractor is an "independent contractor." As long as the 
relationship in a particular case is so viewed, the federal 
conflict of interest statutes do not apply. 

Payment for services is based on hourly rates, the range of 
which is specified in the agreement. The negotiated rate can be 
changed only by written amendment to the contract and firms may 
not propose or charge rates in excess of those it is charging the 
FSLIC on other matters. Reimbursement for certain expenses, at 
cost, is provided. The negotiations for the contract will involve 
discussions regarding such matters as the extent to which the 
FSLIC will pay for certain expenses including copying of documents 
at cost. The FSLIC is always able to obtain discounts in fees 
from private attorneys because of the volume of the work 
assigned. 



427 

See note 339 supra . 

428 

See text preceding note 422 supra . 

429 

These criteria are similar to those relied upon by private 
corporations and the FDIC. See text at note 339 supra . 

430 

See text preceding note 422 supra . 

4.0-1 

See text at note 449 infra. But see text at note 453 



infra. 

432 



FHLBB Interview. 



CONTRACTING FOR LEGAL SERVICES 375 



Invoices are required to be submitted monthly. The content 
of these is prescribed to include the names of agency personnel 
who reviewed the work in question, a description and cost of the 
services, including the name(s) of the individual(s) performing 
them and the time expended. Also on a monthly basis the 
contractor must file a report detailing the total billings for the 
month for both fees and expenses, cumulative total billings for 
all months, names of siibcontractors used, and, with regard to 
litigated matters, the estimated recoverable damages. An agency 
attorney is designated as the General Counsel's Official 
Representative whose duties include placing orders for services 
and inspecting a contractor's work for compliance with the 
statement of work and standard of performance prior to payment for 
services rendered. 

A comparison between the existing reporting requirements of 
the FDIC and the FSLIC shows that the former is much more 
comprehensive, though this difference in treatment is likely to 
some degree traceable to the desire by the FDIC to maintain closer 
control over the outside counsel. However reporting requirements 
under the Legal Information Management System that is now in the 
final stages of development are almost identical to those of the 
FDIC. 

C. Other Federal Departments and Agencies 

With regard to other federal departments and agencies, the 
available data relating to their use of outside counsel is several 
years old in many instances and incomplete with regard to some of 
the issues canvassed by this report. Nevertheless, there appears 
to be a sufficient basis on which to draw several general 
conclusions . 

First of all, legal work of all types, from the purely 
advisory to litigation, is contracted out. Some agencies use 
litigation counsel frequently; others rarely or not at all. The 
reasons for procuring the services of private counsel appear to be 
similar to those relied upon by the FDIC, the FSLIC and private 
corporations. Written agency guidelines with regard to 
retention of outside counsel and other matters do exist in some 
cases, and vary from sketchy to relatively elaborate. Competitive 
procedures are utilized on occasion; at other times some of the 
exceptions under CICA to full and open competition are relied 
upon. The relationship generally established with the service 
provider appears to be considered purely contractual, not 
employer-employee. Fees paid and fee arrangements vary 
significantly, to some degree apparently reflective of the type of 
work involved. Control over retention appears to usually rest in 
the agency's General Counsel Office. Finally, while contracting 
out may be the exception rather than the rule in the case of most 



"^^^See text following note 29 supra , and text at notes 401-02 



supra 



376 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



agencies, a not insubstantial amount of piiblic funds appears to be 
spent each year for attorneys ' services when the expenditures by 
all agencies are combined. 

A tabular summary of the available data is presented in 
Appendix A to this report. 

VI . Conflicts of Interest 

A person performing services for the government may be 
subject to a variety of statutory prohibitions on receipt of 
salary and compensation from private sources, participating 
in governmental decisions in which he or his associates has a 
financial interest, acting as attorney or agent in certain ._„ 
proceedings at the same time he is working for the government, 
and serving as an agent or attorney with respect to certain-^^ 
matters following his departure from government employment. 
Violations are subject to criminal penalties. 

These restrictions apply to "officers" and "employees" of the 
United States, including so-called "special Government employees." 
They are not limited to attorneys but apply to all persons falling 
within the ambit of these terms. Attorneys are subject to other 
conflict of interest regulation pursuant to state codes of 
professional responsibility, which codes may be more demanding 
in various respects than the federal criminal law or perhaps less 
stringent in others. In the latter case, of course compliance 
with federal law is not excused. 

Special government employees are subject to somewhat less 
restrictions than "regular" employees with regard to the 
prohibitions on receipt of salary and "compensation" for their 
services, representation activities while in government 



"^^"^See 18 U.S.C. § 209 (1982). 

435 
•^ Id. § 203. 

^^^Id. § 208. 

437 

^ Id. § 205. 

^^^ Id. § 207. Section 207(g) imposes certain prohibitions on 
partners of special government employees. 

439 

See generally Rotunda, note 56 supra . 

440 

Id_^ § 209(C) . 

441 



Id. § 203(c). 



CONTRACTING FOR LEGAL SERVICES 377 



442 443 

service, and activities following their federal employment. 

With respect to the prohibitions relating to acts affecting a 

personal financial interest, no distinction is ma^^^between 

special government employees and other employees. 

A "special Government employee" means: 

an officer or employee of the executive or 
legislative branch of the United States 
Government, of any independent agency of the 
United States or of the District of Columbia 
who is retained, designated, appointed, or 
employed to perform, with or without 
compensation, for not to exceed one hundred 
and thirty days during any period of three 
hundred and sixty- five consecutive days, 
temporary duties either ggcS full-time or 
intermittent basis . . . 

In the context of agency retention of outside counsel, it may 
be crucial to determine whether the attorney chosen is an 
"employee" within the meaning of these statutes. If he or she is, 
performance of "duties" pursuant to contract for more than the 
designated 130 days a year will mean that he or she is subject to 
the more comprehensive conflict of interest restrictions. If for 
130 days or less, then the less restrictive, though still 
substantial, conditions attach. If he or she is not an "officer" 
or "employee," then the restrictions do not apply of their own 
force, though an agency might choose to incorporate them in any 
contract awarded. 

Attorneys appointed as.temporary experts or consultants 
pursuant to 5 U.S.C. § 3JQ9 clearly fall within these conflict 
of interest provisions. Similarly outside counsel appointed , 
for example, as litigators for^the Federal Election Commission 
pursuant to 26 U.S.C. § 9010 may be covered. If, however, a 
service provider is deemed to be an "independent" contractor, the 



442 

443 

^^•^Id. § 207(C). 

^^^Id. § 208(a). 

^^^Id. § 202(a). 
446 

See text at notes 69-77 supra . 
"^"^^See generally Federal Personnel Manual, Chapter 735 



Appendix C. 
448 



See text at notes 107-11 supra 



378 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



449 
statutes do not apply. As a general matter, the greater the 

supervision and control exercised over the contractor's work, the 

more likely the contractor may be deemed an "employee" for the 

purposes of title 18. While some interpretations of these 

federal conflict-of-interest statutes have referred to the civil 

service definitiog^Qf "employee," which emphasizes the element 

of "supervision, " this has not always been accepted as the only 

appropriate approach. One court has recently indicated that a 

temporary consultant appointed under Section 3109 and a special 

government employee within the meaning of 18 U.S. C. § 202(a) need 

not meet the civil service definition of "employee" and^the 

alleged "strict supervision" test incorporated therein. It, 

therefore, appears that a respectable argument might be made that 

attorneys retained under the 1986 Debt Collection Amendments may 

be considered "employees" within the preview of the conflict of 

interest provisions given the degree of control over their ^^a 

activities which is apparently contemplated by the legislation. 

An agency seeking to retain outside counsel may believe that 
the restrictions applicable under the conflict of interest 
provisions of title 18 will unduly restrict its ability to obtain 
the type of attorney or firm it believes it needs to adequately 
perform the services. Where this is the case, surrender of 
substantial control, where permitted by law, may be the only way 
to avoid this result, though.it may in fact not always be 
sufficient in and of itself. On the other hand, where an 
agency believes that any attorney retained should adhere to the 
statutory restrictions, it has more freedom in structuring its 
relationship with the contractor and, even where the contractor is 
deemed "independent", the agency could impose the prohibitions of 
Title 18 by contract. 



449 

See , e.g. , Office of Legal Counsel, Department of Justice, 

Memorandum Opinion for the Deputy Associate Attorney General 

(prepared by Larry A. Hammond, March 23, 1979). 

"^^^Id. note 2. 

451 

Id. See also Memorandum from J. Jackson Walter, Director, 

Office of Personnel Management to Heads of Departments and 

Agencies of the Executive Branch Re Members of Federal Advisory 

Committees and the Conflict-of-interest Statutes (July 9, 1982) at 

6. (hereinafter "Walter Memorandum"). 

^^^5 U.S.C. § 2105(a)(3) (1982). 

^^^ See Aluminum Co. of America v. F.T.C., 589 F. Supp. 169, 
175-6 (S.D.N.Y. 1984). 

454 

See text at notes 246-47 supra . See also Lovitky, supra 

note 47, at 345-48. 

455 

See Walter Memorandum. 



CONTRACTING FOR LEGAL SERVICES 379 



Where these restrictions do apply, the agency should examine 
for potential conflicts at the stage where it is considering which 
firm or attorney to retain and also require disclosure by the 
contractor of actual or potential^gpnflicts as soon as they become 
evident after contract execution. At the outset of the 
relationship the contractor shguld be clearly advised that the 
prohibitions of Title 18 apply (if they do). 

VII. General Summary, Conclusions and Recommendations 

Clearly, retaining outside counsel to provide legal services 
to the federal government is the exception rather than the rule 
for most agencies. Other than those instances where there might 
be a lack of legal authority, this pattern may be attributable to 
a variety of factors, including historical practice and a concern 
for the morale of government attorneys who might view such service 
contracting as suggesting a less than confident agency evaluation 
of their legal abilities. More importantly, the relative 
infrequency of seeking outside legal assistance may implicitly 
reflect judgments that it is indeed more cost effective to rely on 
in-house expertise than outside counsel in most cases, that 
consideration of the government and public interest is more likely 
to be uppermost in the minds of full-time employees than 
outsiders, and that control over the rendition of the services by 
a contractor in order to avoid potential constitutional and other 
problems is more realistically achievable where a full-fledged 
employer- employee relationship exists. Opinions of the General 
Accounting Office suggest that, before an agency seeks outside 
legal assistance, it should assure itself that its staff ig^got in 
a position to provide the advice or other services needed. In 
some instances the staff of other agencies may be in a position to 
help out and this option may profitably be explored. 

Departures from historical practice, even if clearly 
justified, may have unsettling effects on citizens' perceptions of 
their government and argue for some degree of caution, or at least 
clear explanation for these changes. In taking various 



"^^^See, e.g. , 48 C.F.R. 37.205(b)(4) (1986) (in consulting 
contracts, disclosure to be required and warning given regarding 
conflicts). 

^^^Cf . Federal Personnel Manual, Chap. 375, Appendix C at 2 . 
Other than the provisions of Title 18 dealing with conflicts of 
interest, the Code of Federal Regulations contains numerous 
provisions dealing with employee responsibilities and conduct. 
See , e.g. , 5 C.F.R. Part 735 (1985). Moreover the FAR itself has 
provisions dealing with organizational conflicts, see 48 C.F.R. 
§ 9.508 (1986), which are applicable to service contracting. Id. 
§ 37.110(d). 

458 

^ See text at notes 92-93 supra . 



380 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



procurement actions, failure to consider their impact on employee 
morale may result in the loss of competent and dedicated 
professionals to the private sector. However, where it is more 
cost effective to retain outside counsel than perform the services 
by full time employees, where sufficient control can be exercised 
over the legal contractor to protect the government's and public's 
interests, and where adequate mechanisms are in place to protect 
against conflicts of interest, legal service contracting can be 
justified and should at least not be discouraged as long as the 
contracting agency fully considers those less easily quantifiable 
impacts caused by its procurement activities. Moreover in 
calculating the economic costs of obtaining outside assistance, 
the agency must consider those costs imposed by the procurement 
process itself (including delay) and the needs for supervision 
over any attorney(s) retained. 

In the private sector, corporations have increasingly 
scrutinized their practices of going outside for legal assistance 
to determine whether or not they are economically justified. The 
upshot of this reevaluation has resulted in many cases in 
expansion of in-house staffs. For most federal agencies, the 
question may in fact present the "flip side" of the problem facing 
the private firm: should they increase the number of instances 
where they seek the legal services of private attorneys. 

In determining cost-effectiveness it is clear that the 
situation confronting each agency must-^bg individually considered; 
generalizations may be of little help. One thing is clear 
though — price should not be considered in the abstract. The per 
hour salary cost for in-house assistance may be $40 and that of 
outside counsel may be $140, but if the likelihood of a successful 
result is ten times greater in the case where a private attorney 
is utilized because of his or her experience with the problem, 
reliance on the governmental employee for the work may be 
difficult to justify. In-^yiew of this, mandatory imposition by 
legislation of "fee caps" on the amounts paid private attorneys 
is simply not a good idea since it may prevent the government from 
obtaining the quality of legal service that it needs to adequately 
carry out its functions. 

For agencies which only occasionally require legal services 
of a particular kind, it may make little economic sense to argue 
that the permanent staff size should be augmented for the sole 
purpose of dealing with these cases. Choosing the optimal 
full-time staff size is, however, hardly an exact science. For 
example, putting aside the difficulties in obtaining Congressional 
approval of funds for staff augmentation, the advisability of 
significant additions to in-house legal staff in the case of the 



459 

See generally Fischer, note 1 supra . 

See , e.g. , S. 1580, 99th Cong. 1st Sess. (private counsel 
for litigation limited to per hour compensation of $75). 



CONTRACTING FOR LEGAL SERVICES 381 



FDIC and the FSLIC is made problematical by uncertainty regarding 
how long the current rash of bank failures will continue. 

In determining the optimal size for an in-house legal staff, 
an agency may profit from the teghaiques of analysis being 
developed in the private sector. However, in making that 
calculation, consideration must be given to resource needs related 
to supervision exercised over outside counsel by full-time staff. 

In that regard, moreover, as the nature of required legal 
services changes--from purely advisory, to actively dealing with 
third parties on behalf of the government as in a labor 
negotiation, to the conduct of litigation--the need for close 
control over outside counsel may substantially increase based on 
both constitutional and other considerations. Unlike the 
situation facing a private corporation, this increased need for 
and exercise of control can result in the imposition of a variety 
of legal , restrictions relating to the retention of outside 
counsel. This in turn may prevent successfully contracting out 
where, in purely economic terms, it is fully justified. Or it may 
make it more expensive to contract for needed services. For 
example, due to mandated pay limits or conflict of interest 
restrictions, private lawyers may be unwilling to furnish 
requested services or may be willing to do so only at a cost which 
is prohibitive for the government. This is not to suggest, 
however, that "control" need be seen as purchased at too high a 
price in these instances. 

Where control of varying degrees is authorigeg, the 
techniques currently found in t^e^private sector and in the 
practices of the FDIC and FSLIC may be worthy of emulation, 
with appropriate modifications, by other federal 
instrumentalities. It should be noted that these procedures 
attempt to insure that costs are minimized throughout the 
performance of the contract. 

It is questionable whether a particular federal agency should 
now be authorized or required to draft mandatory criteria and 
practices applicable to contracting for legal services by other 
agencies. First of all, experimentation in the area of improving 
cost-effectiveness in the provision of legal services is of 
relatively recent origin in the private sector. It may, 
therefore, be premature to draft any set of trans-agency 
guidelines, even if helpful generalized guidance eventually can be 
formulated. Secondly, the situations facing various agencies may 



See generally Fischer, note 1 supra . 

462 

See, e.g. , text at notes 106-17 supra . 

See text at notes 32-36 supra . 

464 

See text at notes 357-80, 430-32 supra . 



382 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



be unique in ways that argue against trans-agency practices in 
this area. When it comes to litigation by outside counsel, the 
experience of the banking agencies is more impressive than many 
other agencies, including the Department of Justice. Yet much of 
their expertise may be conditioned by the peculiarities of the 
problems facing them. 

Accordingly, each agency, including the Department of 
Justice, should experiment with its practices in retaining outside 
counsel, keeping in mind both cost-effectiveness and the needs for 
control of decision-making. No one agency should be vested with 
the power of overview and regulation of these practices at the 
present time. An exception to this could be made in those 
instances where the Department of Justice is granted by statute 
the authority to permitj-(and restrict) an agency's use of outside 
counsel for litigation or where the only basis for the agency's 
litigation authority is a memorandum of understanding with 
Justice. Here an argument exists that Justice should at least 
have the power to review and veto an agency's choice of criteria 
and procedures for contracting for litigation services. 

At the same time all agencies should be encouraged to 
communicate among themselves and with the private sector with 
regard to techniques for insuring that the use of outside counsel 
is cost-effective. It may be also advisable in many cases to 
require that the agency's Office of General Counsel approve all 
legal services contracts to ensure overall supervision and control 
of the extent of legal service contracting. In addition, a 
recommendation has merit that written documentation should be 
prepared by each agency which may need to retain private attorneys 
regarding such matters as the criteria for deciding when to retain 
outside counsel and which attorneys to retain and guidance to 
firms or attorneys chosen regarding agency practices and 
expectations. Written documents are useful for training purposes 
and to jog memory as well as avoid misunderstandings with outside 
counsel. In drafting these, appropriate attention should be given 
to similar documents prepared by other agencies and private 
corporations . 

In terms of the procedures for choosing which attorney or 
firm should provide a particular service. Congress has been 
reasonably explicit on this matter with the enactment in 1984 of 
the Competition in Contracting Act. That statute provides 
exemptions from its formal competitive requirements in particular 
cases, such as where there is a need for immediate action, so that 
agencies may not be unduly hampered in many instances, though one 



^^^See, e.g. , 38 U.S.C. § 1830(a) (1982), note 68 supra . 

^^^See ACUS Hearing at 27-28 (statement of Joseph Welsh, 
former Inspector General, U.S. Department of Transportation). 

"^^^See text at notes 132-85 supra . 



CONTRACTING FOR LEGAL SERVICES 383 



study has suggested that the procedures mandated by the Act and 
the Federal ^cguisition Regulation may significantly slow 
procurement. Even where the costs, in terms of delay or 
otherwise, of allowing full and open competition are significant 
and the economic savings from competition are small, the 
noneconomic benefits of competition in dispelling to some degree 
the fact or appearance of favoritism may still be substantial. 

It is clear, moreover, that savings to the government 
resulting from competition, whether formally or informally 
conducted, can be significant and that cost-saving competitive 
procedures can be structured to apply to legal services evgng 
though the lowest price may not be the sole consideration. 
Accordingly, even where the CICA is not by its terms applicable, 
agencies should be encouraged to develop and experiment with 
competitive procedures to the extent appropriate where legal 
services contracting is involved. 

Finally, while legal services contracting shouldQnot be 
discouraged, the role of the attorney in government is such 
that the amount of such procurement should be publicly documented, 
Accordingly, where feasible each agency should prepare an annual 
public report or otherwise maintain a publicly available list 
indicating for each legal services contact the name of the 
attorney retained, the type of work involved, the reason for 
seeking outside assistance, what, if any, competitive procedures 
were used, and the fee paid. 



See Ruttinger, supra note 158, at 20, 24, 35 (whether or 
not an exemption applies). See also ACUS Recommendation 86-8, 
Acquiring the Services of "Neutrals" for Alternative Means of 
Dispute Resolution, 1 C.F.R. § 305.86-8 (1987) (changes in FAR may 
be required). 



470 

See text preceding note 7 supra . 



384 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



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collective 

bargaining 

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advice 




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advice on 
collective 
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work done 
by outside 
counsel 


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major defense 
contractor 

2. patent searches 
and applications 


. 


. 


1. land use and natural 
resource litigation 

2. state and local 
taxation 

3. overseas cases 

4. special studies 

5. conflict of interest 
cases 


1. advice on collective 
bargaining agreement 

2. attorneys as members 
of the Education 
Appeal Board 

3. matters requiring 
adjudication 




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386 



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Fees Paid 

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Fee 

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Task orders 
used for 
subcontract 
work. Fixed 
price on patent 
contracts. 










Dates of 
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OR 
Frequency of 
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Q 
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this agency signed 
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for outside counsel. 


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Type of legal 
work done 
by outside 
counsel 


1 . restructuring govern- 
ment corporations 
responsible for coal 
gasification 

2. nuclear weapons 
programs 


1. analysis of options 
for approaches to 
waste treatment 

2. analysis of permit 
approaches under 
National Pollutant 
Discharge Elimination 
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$29.70/hour 

1981: 

Partner: 

$l41.30/hour 

Associate: 

$91.50-$54/hour 

Paralegal: 

$34.20/hour 








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OR 

Fee 

Arrangement 


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1980: 

$94,690.90 
1981: 
$9,225.90 








Dates of 
Service 

OR 
Frequency of 
Procurement 




This office signed 
2 contracts for 
outside legal 
services during 
1980 & 1981. 


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? 

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Type of legal 
work done 
by outside 
counsel 


This agency hired 
outside counsel for: 

1. litigation related to 
flood insurance issued 
by the National Flood 
Insurance Program. 

2. analysis of legal 
authority for reducing 
consequences of major 
terrorism incidents. 


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contracts 


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Procure- 
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Contracts, 
General ; 
Counsel, i 
Regional 
Counsel, or 
Property 
Disposition 
Branch. 

1 
i 




Hiring 

or 

Contracting 

Office 


General 
Counsel 




Reason for 
seeking 
outside 
Counsel 


expertise, 
conflicts of 
interest, 
lack of 
staff 
resources 


Q 


Too much work 
to be handled 
by in-house 
counsel; need 
for unique 
expertise in a 
sophisticated 
field; 
proximity 
to property. 




i a, 


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Q 


subcontract for 

foreclosure 

agent awarded 

competitively; 

some of other 

contracts 

awarded 

competitively 

including 

sealed bids 




U 00 


N/D 


Total cost was 
$382,050 


routine fore- 
closure: $150- 
$1400 deed in 
lieu: $75-$250 
possessory 
action: $100- 
$400 




Fees Paid 

OR 

Fee 

Arrangement 


$166,000 was 
allocated 
for patent 
applications 
in 1983 and 
$191,000 in 
1984. 
Patent 

prosecutions 
paid for by 
the job, not 
the hour. 


nj 
3 

d 

(D 
OO 


In some 
instances , 
hourly 
rates; other 
times flat 
fee. 




Dates of 
Service 

OR 
Frequency of 
Procurement 




00 
00 

ON 


subcontract for 
foreclosure agent: 
Dec. 6, 1984- 
Dec. 6, 1987 




Type of legal 
work done 
by outside 
counsel 


1. conduct patentability 
searches 

2. prosecute foreign 

& domestic patent and 
trademark applications 
for inventions by 
scientists working 
for the government 

3. independent advice 
to agency 

4. advice regarding 
litigation, including 
patent litigation 


■ 

drug abuse 
project 


1. foreclosure actions 
on defaulted 
mortgages 

2. admiralty law 

3. tax law 

4. closing agents 

5. bond counsel 

6. real estate financing 

7. litigation related to 
HUD owned property 
including evictions and 
rent collections 

8. title reports 

9. training on conciliation 
techniques 




Agency 


d 

X3 O 

4-i -H > 

DDD 
Q W W 


Subdivision: 

National 

Institute 

on Drug Abuse 


d 

XTM 

Jl 

O 00 o, 

d o 

. -H r-( 
4-> M D 

&§ I 

a X a 





390 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



4J 11 

d o. 
O E 

CJ 01 


contract 






Q 








1 

Hiring 

or 

Contracting 

Office 


Individual 
Bureaus on 
recommenda- 
tion of 
Branch of 
Procurement 
and Patents, 
Division 
of General 
Law, Office 
of the 
Solicitor 






Q 

■H 

l; 






Reason for 
seeking 
outside 
Counsel 


1^ 

d 4-> 

3 

11 
o 

01 00 

e 4-1 






o 

4-1 4J 
■H S 

d 4J 
d 




4-) 

d 
g «j 

11 3 
3 01 
O O 

ai a! 


CICA (firms 
submit 
quotations) 
Firms selected 
on basis of: 

1. geographical 
proximity to 
Patent Office 
(<30 miles) 

2. diversity of 
experience in 
technologies 

3. past exper- 
ience with 
Department 






Q 




01 
OS 


attorney: 
$60-$100/hour 
patent agent: 
$50/hour 






> 

CQ 


11 -H 

4-1 U IJ 
4-1 3 

- 10 o 
10 o r- 




Fees Paid 

OR 

Fee 

Arrangement 


Fiscal year 1984 

approximately 

$20,000 

Fiscal year 1985 

approximately 

$18,000 

Fiscal year 1986 

approximately 

$14,000 






During 1983 & 
1984, this 
Dept. spent 
$273,168 
on outside 
counsel. 
Between 1974 
and 1982, 
expenditures on 
Bivens cases 


in 
d 

4J o 
3 -H 

O ^ 
XI ^ 
lO.g 

is; 




Dates of 
Service 

OR 
Frequency of 
Procurement 


Q 


00 

00 


00 

ON 


a 




Type of legal 
work done 
by outside 
counsel 


d d 
. ° ° 

(0 4-14-1 

x: o u 

o -H i; 
M <0 D, 

d d d 

U 11 (U 

■U 4J 4-1 

a. Ch a. 


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1 


o 
s 

<u 

d 
1 


d 
o 

oo 

■H 
■H 

d 
00 

11 

o 




>> 
c 

a, 

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o 

—< u 

O 4-1 

d 

■u 
IX <u 

a 4-1 


International 
Trade Comm. 


j 

1) CJ 

rj (U 

10 u 

<U E 
4J E 
d o 
1-1 o 


4-1*" 

i 
1 


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CONTRACTING FOR LEGAL SERVICES 



391 



4J 4J 
O 4) 










2 


4-1 

c 
u 








Hiring 
or 

Contracting 
Office 










a 

2 


Q 

2 


a 






Reason for 
seeking 
outside 
Counsel 










Q 




Q 
Z 






li 

y o 
o o 

a. ou 










a 

•X. 


Q 

2 


Q 

z 
















ca 


a 
o o 

O I- 


Q 
Z 






Fees Paid 

OR 

Fee 

Arrangement 










Q 


a 








Dates of 
Service 

OR 
Frequency of 
Procurement 


00 

00 


00 

m 

00 


00 

oo 

CTi 




a 

2 


T3 e -o 

<u C d 

2 d CO 

ss«. 

< J3 -H ^ 
CO 4J k-i 00 

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a: 3 TJ — 




00 

00 




Type of legal 
work done 
by outside 
counsel 


^ 


, 


i 


, 


U 4) 3 
4) O. O 


4J 

4-> 
4-> 

i 

d 

4J 


00 

d 

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tit 

m 3 4J 

00 U H 
•H Jtf T3 

*J d «J 
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>> 

a 

< 


> 

a 

X 


V) C 
3 O 
U -i-l 

5S 


>> 
(J 

:^ 


4) >M w 
> O >» 

•H U 

4j 4) a 
w o 3 <: 


O 
n) O 


O d 9J H 

5^c^ii 


■H d 
XI o 

U 4-1 

o ™ 

.-1 4-1 

re M 
Odd 

Z 3 < 


u 

d 

4J 

CO a 
o 

1'5 
o -o 

■:^ § 

re o 
Z Ui 





392 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



2 I 

U t4 o 


o 
z 


Q 
Z 




4J 

re 
1 


z 




Hiring 

or 

Contracting 

Office 


Q 
2 


Q 




a 

z 


.2 jj 




Reason for 
seeking 
outside 
Counsel 


Q 
Z 


Q 

Z 




V 

D. 


Q 




Procurement 
Procedure 


Q 
Z 


a 
z 




a 
o 

4J 

a o 


Q 
Z 




OS 


Q 
Z 


Q 




Q 
Z 


a 




Fees Paid 

OR 

Fee 

Arrangement 


Q 
Z 


Q 
Z 




a 


Q 

z 




Dates of 
Service 

OR 
Frequency of 
Procurement 


a 


Q 
Z 


00 

ON 


Q 

z 


00 

to 
00 




Type of legal 
work done 
by outside 
counsel 


1. representation of 
Navy personnel abroad 

2. advisory opinions on 
unique issues 


OO 

d 

■H 

"a 
a 

s 


O 


1. assistance in 
negotiation of 
term loan agree- 
ments. 

2. litigation arising 
from failure of 
pension plans or 
companies. 

3. advice in 
securities area 


attorneys retained in 
connection with 
investigations 
requiring appearances 
in foreign countries 




e 
< 


00 

B 

re u 
a. 

5"^ 


o 

00 • 

ll 

z <_> 


4^ 


£8^ 


ft 

■H a 
n X 





CONTRACTING FOR LEGAL SERVICES 



393 



<J 1) 

10 >> 

J 1 


2 


Q 


U 

i 
t 




Hiring 

or 

Contracting 

Office 


a 


temporary 
employees 
in disaster 
situations 


a 
z 




Reason for 
seeking 
outside 
Counsel 


a 


2 


Q 
Z 




22 

A. Ou 


a 

z 


1 


g 




4. JS> 

OS 


3 
g 


Q 


o 

z 




Fees Paid 

OR 

Fee 

Arrangement 


O O 1-1 


Q 

Z 


Total spent 
'83 & '84 
$139,469.44 
relating to 
1, 2 & 3 




Dates of 
Service 

OR 
Frequency of 
Procurement 


This agency 
signed one 
contract with 
outside counsel 
during FY '83 
& '84. 


Q 


This office 
signed 14 
contracts 
during FY 
'83 & -84 
relating to 
1, 2 & 3 




Type of legal 
work done 
by outside 
counsel 


4-> 

h 

S 2 

4J 
O H 

s-e 

U <o 


'in 

4J ca 
10 a 

3 41 

*J r-l 

S £ 41 

It! 


1 . amending contracts 

2. presenting claims 
at Iran-U.S. 
Claims Tribunal 

3. renewing contracts 
for adjudicators 

4. foreign pre-litigation 
and non-litigation 
(e.g. real estate 
transfers) 

5. advisory assistance 

6. international 
adjudication before 
International Court of 
Justice 




>> 

c 

41 


g 
4) cn 

•H 41 
U -H 


«M 

ll 


on 

• 41 

4-1 4-1 

O. 10 





394 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



S J 

J r 


as 


w 

10 

o 


a 

2 

u 
a 

s 




Hiring 

or 

Contracting 

Office 


Q 




Office of 
Secretary 
in cooper- 
ation with 
General 
Counsel 




Reason for 
seeking 
outside 
Counsel 


Uses outside 
counsel when 
local court 
rules require 
or when 
otherwise 
appropriate. 




unique 
expertise 
and/or 
emergency 




B 
E U 

u -a 
a OJ 

o o 


o 




1 . sole source 
procurement 

2. predated CICA 

3. sole source 
procurement 

4. sole source 
procurement/ 
urgent need 






Q 
Z 




1. $32.92/hour 

2. Associate: 
$75/hour 
Partner: 
$150/hour 

3. $175/hour 

4. $62.50/hour 




Fees Paid 

OR 

Fee 

Arrangement 


Total spent 
during '83- '84 
(excluding 
uranium litiga- 
tion) was 
$292,495.21. 


B 

o 

B CM 


a 




Dates of 
Service 

OR 
Frequency of 
Procurement 


Q 
Z 


During 1983, 
17 contracts 
and 16 contract 
modifications . 


1. March to Sept. 
1985 

2. 1981-85 

3. Jan. 1985 to Sept. 
1986 

4. N/D 




Type of legal 
work done 
by outside 
counsel 


1. conduct litigation 
(including uranium 
cartel cases) 

2. settle claims 

3. research legislative 
matters 

4. consult as to procure- 
ments and generally 
advise the Board 

5 . bankruptcy 

6. patent work 

7. foreign trade agreements 




1. advice regarding sale 
of Conrail 

2. air traffic, 
controllers strike 

3. transfer of airports 
to local government 

4. teaching workshop for 
regulatory drafting 




>> 

B 

1 


H > < 


Department of 
Transportation 
(in general) 


Subdivisions: 

Office of^. 
Secretary 





CONTRACTING FOR LEGAL SERVICES 



395 



U OJ 
10 >. 

M l4 O 

ft 


1-1 

4J 

a 
u 


4J 4J 
O O 
10 10 

4-1 4J 

o u 


U 4-1 

o o 

4-1 U 

10 a 

U O 

4J U 
g^ 

u « 




Hiring 

or 

Contracting 

Office 


District 
Legal 
Office 
concurred 


1. General 
Counsel 

2. General 
Counsel 


1-4 General 
Counsel 
or other 
offices 

5. Aero- 
nautical 
Center 
Counsel 

6. FAA 
Academy 




Reason for 
seeking 
outside 
Counsel 


need for 
local counsel 


<u 

14-1 H 
O 4-1 

Qua 

Z -^ 01 


1. expertise 

2. need for 
additional 
counsel 
given 
urgency 
and/or 
expertise 

3. expertise 

4. need for 
independent 
opinion 

5. expertise, 
lack of 
resources 

6. lack of 
resources 




2 2 

04 Ou 


In one case 
sole source 
available for 
service. In 
others request 
for quotations. 


1. DOT regs. 

2. urgency 
exception to 
CICA-informal 
solicitation 


1. subcontract, 
exempt from 
CICA 

2. sole source 

3. sole source 

4. competition 

5. N/D 

6. CICA 

! 




OJ d 


title search: 
$300-660 
title insur. : 
$100 


1. $110.00/hour 

2. $37.50 to 
$240 per hour 


1. N/D 

2. $40-$150/hour 

3. $32.50/hour 

4. $50/hour 

5. $30-$100/hr. 

6. $106.00/hr. 




Fees Paid 

OR 

Fee 

Arrangement 


nm 


OJ 

NH 4-1 

o u 

U CM O 


1. N/D 

2. hourly rate 

3. hourly rate 

4. hourly rate 

5. hourly rate 

6. hourly rate 




Dates of 
Service 

OR 
Frequency of 
Procurement 


d NO 

■H 00 

CJN 
4-1 ^ 

4-1 <r 
d OO 

O ON 


1. during FY '83 
& '84. 

2. Oct. 1986 to 

date 


1. 1984-86 
(intermittently) 

2. 1982-1984 

3. 1987 

4. 1985 

5. 1982-85 

6. 1986-87 




Type of legal 
work done 
by outside 
counsel 


>. o! c 

OJ 1-1 3 

o o; d 

OJ OJ 


1 . transfer Alaska 
Railroad to state 
of Alaska 

2. legal services 
related to sale 
of Conrail 


1. regulatory analysis 

2. general litigation 

3. recommendations 
concerning safety 
regulations 

4. examine legal 
ramifications of 
private firms 
providing FAA flight 
services . 

5. trial preparation 
for DOTCAB appeal (s) 

6. lecture to non-legal 
staff regarding FAA 
enforcement 

7. See Appendix A-1^ 




OO 

< 


w 

So 

-o 

■ 3 


3. Federal 
Railroad 
Adminis- 
tration 
(FRA) 


4. Federal 
Aviation 
Adminis- 
tration 
(FAA)2^ 





396 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



3 t 




c 
o 




Q 
Z 










Hiring 

or 

Contracting 

Office 


2 5! 
^8 


11 

(u d 
d 3 

<U 




Q 
2 










Reason for 
seeking 
outside 
Counsel 


1. cost 

2. expertise 

3. potential 
conflicts 
of interest 


Q 




Q 

Z 










4J 

d 
V <u 

Sil 

3 <U 
O O 

a! a! 




Q 




Q 

Z 










Ji ^ 




Z 




a 










Fees Paid 

OR 

Fee 

Arrangement 


$384,043 was 
spent by the 
Treasury on 
outside counsel 
during 1983 & 
1984. 


lO 
il <t 

^■?° 

o O.^ 

D H w 
H 4J 3 




o 










Dates of 
Service 

OR 
Frequency of 
Procurement 




XI d 
00 3 

■H T3 

>> u 
c 14 <r 

re o n 
u 00 

:2 S>4 

H O C 


00 

m 

00 


00 

00 


00 
00 


CO 






Type of legal 
work done 
by outside 
counsel 




Sale by the U.S. of 
warrants to purchase 
14,400,000 shares of 
Chrysler common stock 


, 


U 00 

> d 

*J d 

o .2 


, 


i 


i 




d 
< 


a a 

1; 

re H 
a. 


Treasury 
agencies: 
1. Chrysler 
Corp. Loan 
Guarantee 
Bd. 


d 

CO 

3 


E 

So 

tfro 
3 U 
(J o 

■H 

■ > 

«3 l4 


to to 


5. Savings Bond 
Division of 
Bureau of 
Public Debt 


6. Bureau of 
Engraving 
and Print- 
ing 





CONTRACTING FOR LEGAL SERVICES 



397 



4J U 
(J dJ 

2 V4 O 

o e 








contract 






Hiring 

or 

Contracting 

Office 








General 
Counsel 






Reason for 
seeking 
outside 
Counsel 








Q 






4-1 
g n 

E U 
3 0) 

o o 

04 04 








2 






i> 00 

u c 








partners : 
$75-205/hour 
senior assoc. : 
$55-120/hour 
junior assoc. : 
$30-90/hour 
law clerk: 
i $20-85/hour 






Fees Paid 

OR 

Fee 

Arrangement 








minimum 
retainer or 
ceiling fee 
including 
hourly rates 






Dates of 
Service 

OR 
Frequency of 
Procurement 


CO 


00 

00 

ON 


ON 


During 1983- 
1984, this agency 
signed five contracts 
for the retention of 
special counsel. 


This agency 
signed one 
contract 
with outside 
counsel during 
1983 and 
1984. 




Type of legal 
work done 
by outside 
counsel 


O 


i 


o 


1. landlord-tenant 
case 

2. employees named 
as defendants 

3. real estate 

and pension issues 


00 

d 

■H 

m D 

4J m 
o <u 

00 -H 




>> 

u 

d 
u 


7. Federal Law 
Enforcement 
Training 
Center 


8. Bureau of 
Alcohol, 
Tobacco 
& Fire- 
arms 


4-1 d 


o o u 
o 


o 

i 

o 

1-4 >, 

■ d 

=> < 





398 



ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



2 V4 ^ 

3 g 


4-1 

2 

4J 

c 
o 


1 


no contracts 
(fee for 
service 
attorney) 




Hiring 

or 

Contracting 

Office 


o 


a 


General 
Counsel 




Reason for 
seeking 
outside 
Counsel 


Q 


a 
z 


Performance of 
work by a V.A. 
attorney would 
be untimely or 
uneconomical. 




11 

3 4J 
O O 

O- 04 


a 


o 


Each one of 
the 55 District 
Counsels is 
authorized to 
employ a 

private attorney 
to meet local 
needs. CICA 
allegedly 
inapplicable. 




<U 00 

^1 


partners: 
$160/hour 
associates : 
$140/hour 
(Counsel to 
(Board) 


Partners: 

$l45/hour 

Associates: 

$80/hour 

Paralegals: 

$30/hour 


paid locally 
prevailing fee 
for service, 
not per hour; 
fee varies 
from state to 
state 




Fees Paid 

OR 

Fee 

Arrangement 


Counsel to 
Board paid 
based on 
hourly rates 


The total 
expenditure 
for outside 
counsel during 
1983 and 1984 
was 
$271,650.00 


The fees are 
determined by 
agreement 
between the 
field station 
director, local 
loan guaranty 
officer and 
district counsel 




Dates of 
Service 

OR 
Frequency of 
Procurement 


Since 1980, an 
outside Counsel 
to the Board 
has been retained 


a 

a: 


In 1980, fee 
attorneys handled 
approximately 4,300 
home loan matters 
and were paid approx- 
imately $537,000. 
During last six 
months of 1981 fiscal 
year, fee attorneys 
handled 1,870 
matters and were 
paid $242,000. 




Type of legal 
work done 
by outside 
counsel 


1. negotiations 
relating to 
collective 
bargaining 
agreements 

2. FLSA case 

3. Title VII class 
action 

4. Counsel to the 
Board of ^^ 
Governors 


1. coordinate defense of 
litigation arising 
from conveyance of 
properties to Conrail 

2. banking issues 
for investment 
of federal funds 
in Conrail 


Administration of 
the loan guaranty 
program (close direct 
loans, close sales of 
VA acquired properties, 
conduct court actions). 
Litigation involves 
j evictions, collection on 
1 judgment debts, title 
matters. See also 
Appendix A-2. 




c 
< 


wrn 

04 u 
H 

• > 

3 V3 


^c 

30 

■rl 4-1 

re- re 

Qi -H 

^ I 

3 < 


c 

4-1 

> < 





CONTRACTING FOR LEGAL SERVICES 399 



FOOTNOTES TO APPENDIX A 

1. "N/D" indicates that there is no available information with 
regard to the matter to which it applies. Unless otherwise 
indicated in these footnotes, the data used to compile 
Appendix A was furnished in response to requests filed under 
the Freedom of Information Act, 5 U.S.C. § 552 (1982), by the 
National Law Journal several years ago. See Nat. L.J. 
Feb. 4, 1985, p. 51. The National Law Journal compiled the 
following list of agencies along with their legal services 
expenditures in 1983-84: 

How Much Government Agencies Spent 

Amount Spent 
Federal Agency 1983- '84 

Federal Deposit Insurance Corp. $34,197,137* 

Federal Home Loan Bank Board/ 

Federal Savings and Loan Insurance 

Corp. $8,418,453** 

Department of Transportation $1,293,408 

Veterans Administration $950,000 

Legal Services Corp. $792,192*** 

Federal Reserve Banks $578,164 

Department of Treasury (Including 

Comptroller ) $384 , 043 

Tennessee Valley Authority $374,584 

U.S. Postal Service $300,000 

Department of Justice, Civil Division $273,168 

Federal Emergency Management Agency $229,247 

Department of Housing and Urban 

Development $176,000 

Department of Agriculture $100,000 

Department of Interior $44,123 

Department of Education $42,308 

Department of International 

Development $38,000 

U.S. Air Force $24,939 

Federal Mediation and Conciliation $23,137 

Selective Service System $18,000 

Environmental Protection Agency $7,492 

*Through first nine months of 1984. 
**1983 only. 
***Preliminary estimate. 



400 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Agencies surveyed that reported no use of 
outside counsel included: Internal Revenue 
Service, Federal Trade Commission, Civil 
Aeronautics Board, U.S. Army, U.S. Navy, 
Department of Labor, Securities and Exchange 
Commission, Office of Personnel Management, 
Consumer Product Safety Commission, Interstate 
Commerce Commission, Nuclear Regulatory 
Commission, National Science Foundation, 
Federal Communications Commission, Federal 
Election Commission, General Services 
Administration, Tax and Antitrust Divisions of 
the Department of Justice, Equal Employment 
Opportunity Commission, Federal Labor 
Relations Authority, the Bureau of Alcohol, 
Tobacco and Firearms, and the Bureau of 
Government Financial Operations. 

A close examination of Appendix A indicates some 
relatively minor differences between NLJ figures and those 
derived from this consultant's review of the FOIA and other 
material . The reasons for those discrepancies are unclear at 
this time. 

Finally, it should be noted in connection with Appendix 
A, that data contained under one heading may not always 
relate to that under another for the same agency, thus 
introducing certain possible misperceptions . Unfortunately, 
the lack of complete data at this time prevented a perfect 
matching. 

2. Wolf, Block, Schorr and Solis-Cohen, Draft Report to the 
Administrative Conference of the United States (hereinafter 
"Wolf, Block Report") at 68. 

3. Id^ at 69. 

4. IdL at 70. 

5. Id^ at 70-71. 

6. Administrative Conference [ACUS] Questionnaire Response from 
Francis S. Blake, General Counsel, EPA to Marshall Breger, 
Chairman, ACUS, dated March 6, 1987. 

7. "CICA" refers to the Competition in Contracting Act of 1984, 
now codified in Title 41, United States Code, Sections 251 et 
seq. 

8. Wolf, Block Report at 80. 

9. There are internal guidance documents applicable to retaining 
of outside counsel by Federal Reserve Banks. 



CONTRACTING FOR LEGAL SERVICES 401 



10. Wolf, Block Report at 83-84. 

11. Id. at 71-2; ACUS Questionnaire Response from Barrel J. 
Grinstead, Associate General Counsel, HHS, to Marshall Breger 
(March 30, 1987). 

12. ACUS Questionnaire Responses from Stuart C. Sloame, Deputy 
General Counsel, HUD to Marshall Breger, Chairman, ACUS 
(dated February 20, 1987 and May 19, 1987) and Wolf, Block 
Report at 72-73. The Department has internal guidance 
documents regarding fee schedules . 

13. ACUS Questionnaire Response from Howard H. Shafferman, 
Associate Solicitor, Division of General Law, Department of 
the Interior, to Marshall J. Breger, Chairman, ACUS (no 
date ) . 

14. Wolf, Block Report at 73-75. The Department of Justice has 
both regulations and written internal guidance documents 
dealing with the hiring of private counsel. See 28 C.F.R. 

§ 50.15, 50.16 and Administrative Directive 2120 (Sept. 20, 
1982) (Civil Division). 

15. See General Accounting Office, JUSTICE EXPENDITURES FOR 
PRIVATE COUNSEL AND JUDICIAL FEE AWARDS IN ANTITRUST AND 
SECURITIES CASES (GAO/GGD-84-2 , Oct. 7, 1983). 

16. Wolf, Block Report at 75. 

17. Id^ at 84. 

18. Id^ at 76. 

19. Id^ at 84-85. 

20. Public Hearing Record, Federal Agency Hiring of Private 
Attorneys, convened by Administrative Conference of the 
United States, May 29, 1986, Washington, D.C. (Testimony of 
Frank McCulloch, Special Counsel, PBGC). 

21. Letter of Daniel L. Goelzer, General Counsel to Marshall 
Breger, ACUS Chairman (dated May 13, 1987). 

22. Wolf, Block Report at 86-87. 

23. Id_^ at 76-77. 

24. In several cases DOT has also hired outside counsel to pursue 
administrative level procurement. See id. at 78-79. The 
Department has written internal guidance relating to the 
hiring of experts and consultants. See DOT Order 4200.15 
(March 5, 1981). 



402 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



25. ACUS Questionnaire Response from Neil R. Eisner, Assistant 
General Counsel for Regulation and Enforcement, DOT, to David 
Pritzker, ACUS (no date). 

26. Id^ 

27. ACUS Questionnaire Response from Neil R. Eisner, Assistant 
General Counsel for Regulation and Enforcement, DOT, to David 
Pritzker, ACUS (April 6, 1987). See also General Accounting 
Office, CONRAIL SALE: DOT'S SELECTION OF INVESTMENT BANKS TO 
UNDERWRITE THE SALE OF CONRAIL (GAO/RCED 87-88). (In this 
instance a law firm was involved in the selection of 
investment banks to serve as co-lead managers for the sale of 
Conrail. ) 

28. ACUS Questionnaire Responses from Neil R. Eisner, Assistant 
General Counsel for Regulation and Enforcement, DOT, to David 
Pritzker, ACUS (one not dated; the other dated April 2, 
1987). 

29. Appendix A-1 was compiled from information furnished in 
response to National Law Journal FOIA request. 

30. Wolf, Block Report at 79. 

31. Id^ at 87-88. 

32. See General Accounting Office, POSTAL SERVICE: BOARD OF 
GOVERNOR'S CONTRACT FOR LEGAL SERVICES (GAO/GGD-87-12 ) . 

33. ACUS Questionnaire Response under cover letter from Frederic 
L. Conway, Special Assistant to the General Counsel, VA to 
David Pritzker, ACUS (dated Feb. 12, 1987). The VA has both 
regulations and written internal guidance dealing with hiring 
outside attorneys. See, e.g. , 38 C.F.R. § 14.515(b). 

34. Appendix A-2 was compiled from information furnished in 
response to National Law Journal FOIA request. 



CONTRACTING FOR LEGAL SERVICES 



403 



Appendix A-1 
Federal Aviation Administration 



A. Alaska 

Regional Office (RO) hired attorney for research on the 
impact of aboriginal land claims under Alaska Native Claims 
Settlement Act (ANCSA). It was estimated that this project would 
cost $5,600.00 

B. California 

RO signed contracts amounting to, respectively, $19,998.40, 
$21,000, $17,000 and $20,000 to provide trial counsel for fired 
air traffic controllers. 

C. District of Columbia 

RO signed three contracts for outside legal counsel during 
fiscal years 1983 and 1984. The first contract was for trial work 
for the government's case against COMSAT before DOT's contracts 
appeal board. The pay schedule for the contract was: 





partners 


$150/hour 


associate 


> 4 years 


$125/hour 


associate 


< 4 years 


$115/hour 




paralegal 


$ 35/hour 



The estimated cost of the project was $125,000. 

The second contract was for litigation against General 
Dynamics. The estimated cost of the litigation was $195,000 and 
the pay schedule was: 



senior partner 

senior associate 

junior associate 

paralegal 



$140/hour 
$ 95/hour 
$ 75/hour 
$ 30/hour 



The third contract was for work dealing with a labor 
agreement between the FAA and the Air Traffic Controllers. This 
was modified frequently and the pay schedule was: 



partner 
associate 



$150/hour 
$ 75/hour 



D. Massachusetts 



RO signed contract to try ex-air traffic controller removal 
cases. The estimated costs of the legal work was $9,000,000. 



404 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



Oklahoma 



RO signed two contracts during fiscal years 1983 and 1984 for 
defending a case filed by Mike Mahonroney Aeronautical Center 
One contract was for an estimated cost of $133,160.00 and the 
other contract was for an estimated cost of $20,000.00 



CONTRACTING FOR LEGAL SERVICES 405 

Appendix A-2 
Veterans Administration 

1. Alabama : uses outside counsel for evictions and foreclosures; 
in 1983 $13,454.00, in 1984 $23,358.24. 

2. Arizona : for evictions and foreclosures in outlying counties 
surrounding Phoenix; staff attorneys do evictions locally; in 1983 
and 1984, paid a total of $20,750.00 for foreclosures; during the 
same period, $430.00 on evictions. 

3. California : for eviction proceedings, during 1983 and 1984, 
contracted out 18 evictions at a fee of $75.00 each, for a total 
expenditure of $1,350.00. 

4. Colorado : spent $2,094.08 for outside counsel to represent 
the agency m eviction hearings in 1983 and the first half of 1984 
and spent $2,050.13 for the same from 1/84 through 7/84. 

5. Connecticut : employed one law firm during fiscal years '83 
and '84; firm was retained to do a title search for a fee of 
$100.00. 

6. Washington, D.C. : contracted with four firms during fiscal 
years '83 and '84 for eviction and foreclosure proceedings in 
Maryland, Virginia and the District of Columbia; the following is 
a break-down of the fees paid to outside counsel — 

evictions foreclosures Total 

1983 7,957.58 2,210.00 10,167.58 

1984 3,420.60 3,960.00 7,380.60 

7. Georgia : retained outside counsel for many actions related to 
its loan guaranty program and spent $24,738.82 between 1/4/83 and 
9/20/84. 

8. Idaho : spent $480.00 during 1983 for outside counsel for 
trustee and foreclosure sales. 

9. Illinois : hired outside counsel for forcible detainers; in 

1983, the fees totalled $74,268.24; in 1984, the fees totalled 
$84,384.47. 

10. Iowa: in 1983 and 1984, spent $1,313.21 to retain outside 
counsel to work on eviction proceedings. 

11. Indiana : during fiscal year 1983, spent $6,375.00 to retain 
outside counsel for 51 eviction proceedings; during fiscal year 

1984, spent $4,364.06 to retain outside counsel for 25 eviction 
proceedings; during both '83 and '84, spent $175.00 for outside 
counsel for three loan closings. The total spent on outside 
counsel during '83 and '84 was $10,914.06. 



406 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



12. Louisiana : in 1983 and 1984, spent $44,937.00 in retaining 
outside counsel for sale closings, recording deeds, foreclosure 
filings, evictions and sheriff sales and used 49 different law 
firms. 

13. Maine: in 1983 and 1984, spent $9,920.63 in retaining 
outside counsel for title updates, eviction and foreclosure 
proceedings and title searches. 

14. Maryland : in fiscal year 1983, employed three firms for 
eviction proceedings and title searches and spent $1,955.00; in 
1984; employed 10 firms for title searches, foreclosures and 
evictions and spent $3,070.00; the total spent on outside counsel 
was $5,025.00. 

15. Massachusetts : during fiscal years 1983 and 1984, employed 
nine firms in sixty-six actions and spent $3,705.00. 

16. Michigan : during fiscal years '83 and '84, employed twenty- 
eight firms for eviction and foreclosure proceedings and sale 
closings and spent $80,269.00. 

17. Minnesota : during fiscal years '83 and '84, employed outside 
counsel for loan closings and foreclosures and spent $25,965.00. 

18. Missouri : spent approximately $600.00 on outside counsel 
during fiscal years '83 and '84. 

19. Montana: employed fourteen firms for trustee sales, 
evictions, removing direct loans from bankruptcy and accountings 
for guardianship actions and spent $3,343.69. 

20. New Hampshire : employed nine law firms to perform 
foreclosure and eviction proceedings and spent $10,833.48. 

21. New Jersey : employed thirteen law firms for sale closings 
and eviction proceedings and spent $32,415.00. 

22. New York : 

a. Buffalo: only used outside counsel for eviction 

proceedings at the request of the Loan 
Guaranty Division; in 1983, four firms were 
used in nine eviction proceedings for 
$1,676.33; in 1984, four firms were used in 
seven eviction proceedings for $500.90. 

b. New York: use of outside counsel was limited solely to 

operation of the loan guaranty program; 
outside counsel handled 418 evictions and 520 
foreclosure sales for fees totalling 
$221,433.69. 



CONTRACTING FOR LEGAL SERVICES 407 



23. North Carolina : employed fourteen firms to handle 83 
foreclosure proceedings at the cost of $20,750.00. 

24. Ohio : spent $68,444.97 on outside legal counsel during 1983 
and 1984; counsel retained for handling sheriff sales. 

25. Oregon : spent $2,150 in 1984 for eviction proceedings 
handled by outside counsel and $681.15 in 1984 for foreclosures 
handled by outside counsel. 

26. Pennsylvania : outside counsel retained only for eviction 
proceedings; during 1983 and 1984, employed 15 attorneys and spent 
$47,592.00. 

27. Tennessee : employed outside counsel for 169 eviction cases 
and 2 guardianship cases and spent $17,485.72. 

28. Texas : 

a. Waco: employed five attorneys for forcible entry and 

detainer actions. 

b. Houston: spent $19,936.90 on outside legal counsel 

during 1983 and 1984. 

29. Utah ; spent $100.00 on outside counsel for two trustee 
sales . 

30. Vermont : retained ten firms for title searches and sale 
closings and spent $1,957.90. 

31. Virginia : retained eighteen firms for foreclosure and 
eviction proceedings and spent $8,830.00. 

32. Washington : began using outside counsel in 1984 and spent 
$3,802.41. 

33. West Virginia : employed outside counsel for two eviction 
proceedings and spent $416.05. 

34. Wisconsin: two fee attorneys employed by the Veterans 
Administration in connection with the closing of direct loans with 
specially adapted housing grants in Wisconsin and spent $390.00. 

The total spent by all of the reporting officers was $909,765.25. 



409 



ADMINISTRATIVE CONFERENCE OF 
THE UNITED STATES 

Report for 
RECOMMENDATION 87-3 



ETHICAL PROBLEMS IN FEDERAL AGENCY 
HIRING OF PRIVATE ATTORNEYS 



by 

Ronald D. Rotunda 

Professor of Law 
University of Illinois College of Law 



October 1986 

Reprinted from the 

Georgetown Journal of Legal Ethics 

Volume 1, Number 1, Summer 1987 



410 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



I. Introduction 

While the federal government employs a very large in-house staff of over 
17,000 attorneys to handle its legal problems, ^ it nevertheless spends over 
twenty-five million dollars a year to hire outside counsel to represent its in- 
terests.2 A small part of this yearly amount represents the cost of hiring 
private attorneys to defend federal employees who have been sued for consti- 
tutional torts, when a conflict of interest prevents the Justice Department 
from representing the employees directly.^ In these cases the private lawyers 
do not really "work for" the government any more than defense counsel rep- 
resenting indigent criminal defendants "work for'* the government.^ The 
government retained private lawyers work for the private client — federal em- 
ployee or indigent defendant — and the federal government merely pays the 
fees; the government may not direct or regulate the lawyer's professional 
judgment.^ The lawyer's duty is to the client, not to the government.^ 

Various agencies of the federal government hire private attorneys to repre- 



* Professor of Law, University of Illinois College of Law. B.A. 1967, J.D. 1970, Harvard Uni- 
versity. An earlier draft of this paper was submitted to the Administrative Conference of the 
United States at its request. 

1. Nat'l L.J., Feb. 4, 1985, at 1; Wash. Post, July 18, 1985, at A22, col. 1. 

2. Nat'l L.J., Feb. 4, 1985, at 1; Legal Times, June 9, 1986, at 2, col. 1. 

3. Legal Times, June 9, 1986, at 6, col. 4. 

4. See. e.g., Polk County v. Dodson, 454 U.S. 312 (1981). See generally 2 R. Rotunda, J. 
NowAK, & J. Young, Treatise on Constitutional Law: Substance and Procedure 
§ 16.4, at 186-190 (1986) (involvement of private actor with government must be more than mere 
receipt of funds to show state action). 

Similarly, while an insurance company may pay for the lawyer, the real client is the insured. 
Reynolds v. Maramorosch, 208 Misc. 626, 629, 144 N.Y.S.2d 900, 904 (Sup. Ct. 1955); Allstate Ins. 
Co. V. Keller; American Employers Ins. Co. v. Goble Aircraft Specialties, Inc., 205 Misc. 1066, 
1075, 131 N.Y.S.2d 393, 401 (Sup. Ct. 1954); cf. Rogers v. Robson, Masters, Ryan, Brumund & 
Belom, 81 111. 2d 201, 205, 407 N.E.2d 47, 49 (1980) (counsel employed by insurer in malpractice 
action had both insurer and physician as its clients). 

5. See Model Code of Professional Responsibility DR 5- 107(B) (1980) ("A lawyer shall 
not permit a person who . . . employs, or pays him to render legal services for another to direct or 
regulate his professional judgment in rendering such legal services."); accord Model Rules of 
Professional Conduct Rule 5.4(C) (1983) (same); id. Rule 1.8(f) ("A lawyer shall not accept 
compensation for representing a client from one other than the client unless: (1) the client consents 
after consultation, (2) there is no interference with the lawyer's independence of professional judg- 
ment or with the client-lawyer relationship . . . ."); see also The Florida Bar v. Consolidated Busi- 
ness & Legal Forms, Inc., 386 So. 2d 797 (Fla. 1980) (supervision and control of employee lawyers 
by nonlawyer officers and stockholders of Florida corporation for sole purpose of personal financial 
gain was inconsistent with Model Code and constituted unauthorized practice of law); Wood v. 



AGENCY HIRING OF PRIVATE ATTORNEYS 41 1 

sent, that is, *'work for," the government on a variety of matters. These 
matters range from the Comptroller of the Currency's fight with a private 
landlord over rent charged to government agencies to the Federal Deposit 
Insurance Corporation's purchase of seventeen million dollars of private law- 
yers' time to handle temporary surges of complicated work throughout the 
country when banks have failed.^ 

Federal agency hiring of private attorneys raises many legal and economic 
issues involving the statutory authority for such hiring, the economic justifi- 
cations, and the possible need for controls to prevent abuse of government 
resources. These issues may be considered elsewhere.^ In this article, I focus 
instead on the special problems of legal ethics that such agency hiring cre- 
ates. The article analyzes the implications of the rules of legal ethics as. they 
apply to private attorneys and the private law firms within which they work, 
when the particular client happens to be a federal agency or the United 
States government. I then conclude with suggestions concerning the way in 
which the private attorneys and government agencies involved should ad- 
dress the issues of professional responsibility. 



Georgia, 450 U.S. 261, 269 (1981) (payment of legal fees by employer created potential for conflict 
of interest in establishing legal precedent requiring sacrificing interests of defendants). 

A note on citation form: The American Bar Association (ABA) Model Code of Professional Re- 
sponsibility is divided into three types of statements. The nine "Canons" are "axiomatic norms" 
that "embody the general concepts from which the Ethical Considerations (EC) and the Discipli- 
nary Rules are derived." The "Disciplinary Rules" (DR) are "mandatory in character"; that is, 
violations may subject the attorney to discipline up to and including disbarment. The Ethical Con- 
siderations, on the other hand, tend to be "aspirational in character" and represent an unenforce- 
able but basic consensus of the profession as to proper lawyer behavior. See generally Model 
Code of Professional Responsibility Preamble and Preliminary Statements (1980). 

In 1983, the ABA adopted a new model ethical code, called the Model Rules of Professional 
Conduct. The disciplinary rules (or black letter) of the Model Rules are cited as Model Rules 
Rule 1.1, etc., while the discipHnary rules of the Model Code are cited as Model Code DR 1-101, 
etc. The commentary to each of the Model Rules explains and illustrates the meaning and purpose 
of the rule. See Model Rules Scope, comment 9. The ABA did not officially number the com- 
ments, but the numbering system that has become frequently used may be found in T. Morgan & 
R. Rotunda, 1987 Selected Standards on Professional Responsibility (1987). 

Virtually every state and federal jurisdiction has adopted some form of either the Model Code or 
Model Rules as law. I therefore focus on both the Model Code and the more recent Model Rules. 

6. In fact, a public defender's actions in representing his or her client are not even "state action." 
Polk County v. Dodson, 454 U.S. 312, 324-25 (1981). See generally 2 R. Rotunda, J. Nowak & 
J. Young, supra note 4, at § 19.17, at 770-71 (1986) (government employment alone does not 
establish color of state law). 

7. Nat'l L.J., Feb. 4, 1985, at 53. See also Freiwald, Private Lawyers See Riches in Federal Debt 
Collection, 9 Legal Times, Feb. 16, 1987, at 1, col. 1 (discussing pilot program privatizing collection 
of debts to federal government.) 

8. See generally Dickinson, Senate Studies Agencies' Use of Outside Counsel, Legal Times, June 9, 
1986, at 2; Federal Agency Hiring of Private Attorneys, Public Hearing Before the Administrative 
Conference of the United States, May 29, 1986 (unpublished) (on file at Georgetown Journal of Legal 
Ethics) [hereinafter Public Hearing]. 



412 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

Because ethical conflicts of interest raise particular concern,^ it is to those 
questions that I turn first. 

II. Conflicts of Interest 

A. INTRODUCTION 

The importance of the basic federal statutes governing conflicts of interest 
is reflected by their inclusion in title 18 of the United States Code — the crimi- 
nal title. ^0 Federal law, however, does not preempt the field; ethics codes of 
relevant state jurisdictions also govern. * ^ Nor do the federal conflict of inter- 
est statutes raise any unique or unusual ethical problems as applied to spe- 
cially retained private attorneys; the statutes simply apply equally to full- 
time government attorneys or those private attorneys hired by the govern- 
ment. ^^ xhe federal government cannot avoid the applicability of the federal 
law simply by contracting out its legal needs. Thus, in this section I will 
focus primarily on the American Bar Association's Model Code and Model 
Rules as they govern the problem of private lawyers retained by the govern- 
ment to work on specific problems, because these provisions — which nearly 
every jurisdiction has adopted as positive law — raise some special concerns. 

It is the obligation of the lawyer to '^exercise independent judgment on 
behalf of a client." ^^ The term "conflicts of interests" is a popular one and 



9. Public Hearing, supra note 8, at 58 (testimony of Prof. S. Cohn); id. at 68 (testimony of Prof. 
T. Morgan). 

10. Chapter 11, Bribery, Graft, and Conflicts of Interests, 18 U.S.C. §§ 201-24 (1982). See gener- 
ally Morgan, Appropriate Limits on Participation by a Former Agency Official in Matters Before an 
Agency, 1980 Duke L.J. 1. 

11. Special regulations promulgated by an agency would govern its personnel and the people 
appearing before it. Thus, the Securities and Exchange Commission has taken action to govern the 
ethics of the lawyers appearing before it. E.g.. SEC v. National Student SEC Mktg. Corp., [1977-78 
Transfer Binder] Fed. Sec. L. Rep. (CCH) 96,027 (D.D.C. May 2, 1977). See also Exec. Order No. 
1 1,222, Prescribing Standards of Ethical Conduct for Government Officers and Employees, 30 Fed. 
Reg. 6469 (1965), as amended, 3 C.F.R. 306 (1964-65) (reprinted in Codification of Presidential 
Proclamations and Executive Orders, 61-67 (1981)) (applying certain ethics rules to all government 
employees without regard to whether they are lawyers); Agency Regulations Governing Ethical and 
other Conduct and Responsibilities of Employees, 5 C.F.R. §§ 735.201-735.210 (1986) (same). 

12. See infra note 47. 

13. Model Code Canon 5. See also Model Code EC 5-1 ("The professional judgment of a 
lawyer should be exercised within the bounds of the law, solely for the benefit of [the] client and free 
of compromising influences and loyalties."); Model Code DR 5-101(A) ("Except with the consent 
of his chent after full disclosure, a lawyer shall not accept employment if the exercise of his profes- 
sional judgment on behalf of his client will be or reasonably may be affected by his own financial, 
business, property, or personal interests."); DR 5-104(A) ("A lawyer shall not enter into a business 
transaction with a client if they have differing interests therein . . . unless the client has consented 
after full disclosure."); DR 5-105 ("Refusing to Accept or Continue Employment if the Interests of 
Another Client May Impair the Independent Professional Judgment of the Lawyer"). Cf Model 
Rules Rules 1.7, 1.8, 1.9. Model Rules Rule 1.7 provides in part: 



AGENCY HIRING OF PRIVATE ATTORNEYS 413 

used in the Model Rules. ^"^ The Model Code speaks more of "differing inter- 
ests," which are said to "include every interest that will adversely affect 
either the judgment or the loyalty of a lawyer to a client, whether it be a 
conflicting, inconsistent, diverse or other interest.*' ^^ 

The ethics codes focus on many types of conflicts of interest, most of 
which do not raise any unique problems of application when the government 
retains a private attorney. A conflict might exist between a client's and the 
lawyer's financial, business, property, and personal interests. ^^ For example, 
if the government hired a private attorney to collect a debt, and the debtor 
was the son or daughter of the private attorney, a possible conflict of interest 

(a) A lawyer shall not represent a client if the representation of that client will be directly 
adverse to another client, unless: 

(1) the lawyer reasonably believes the representation will not adversely aflfect the 
relationship with the other client; and 

(2) each client consents after consultation. 

(b) A lawyer shall not represent a client if the representation of that client may be materi- 
ally limited by the lawyer's responsibilities to another client or to a third person, or by the 
lawyer's own interests, unless: 

(1) the lawyer reasonably believes the representation will not be adversly affected; 
and 

(2) the client consents after consultation. . . . 

Model Rules Rule 1.8 provides in part: 

(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire 
. . . pecuniary interest adverse to a client unless: 

(1) the transaction and terms on which the lawyer acquires the interest are fair and 
reasonable to the client and are fully disclosed and transmitted in a manner which can 
be reasonably understood by the client; .... 

(b) A lawyer shall not use information relating to representation of a client to the disad- 
vantage of the client unless the client consents after consultation 

Model Rules Rule 1.9 provides: 

A lawyer who has formerly represented a client in a matter shall not thereafter: 
(a) represent another person in the same or related matter in which that person's interests 
are materially adverse to the interests of the former client unless the former client consents 
after consultation; or (b) use information relating to the representation to the disadvantage 
of the former client except as rule 1.6 would permit with respect to a client or when the 
information has become generally known. 

As Model Rules Rule 1.7 comment 1 provides: "Loyalty is an essential element in the lawyer's 
relationship to a client." 

14. Kg., Model Rules Rule 1.7; Model Rules Rule 1.7 comment 1 ("An impermissible con- 
flict of interest may exist before representation is undertaken, in which event the representation 
should be declined."). 

15. Model Code Definitions (1). See also Model Code EC 5-14 ("Maintaining the indepen- 
dence of professional judgment required of a lawyer precludes his acceptance or continuation of 
employment that will adversely affect his judgment on behalf of or dilute his loyalty to a client. 
This problem arises whenever a lawyer is asked to represent two or more clients who may have 
differing interests, whether such interests be conflicting, inconsistent, diverse or otherwise 
discordant."). 

16. See generally Model Code EC 5-1 to 5-13 (interests of lawyer that may affect judgment). 
See also Model Code DR 5-101 to 5-104; Model Rules Rule 1.7(b), 1.8, set out supra note 13. 



414 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

would exist and the attorney must either refuse to accept the case or must 
disclose the conflict and secure knowing consent if the conflict is to be 
waived. The lawyer, in short, would follow normal procedures; the fact that 
the client is the federal government rather than a local business would raise 
no special problems and would affect neither the result nor the method of 
handling the conflict. 

The bulk of conflicts issues that raise special problems involve possible 
differences between the interests of two or more of the lawyer's present cli- 
ents (simultaneous representation) or between a present cHent and the law- 
yer's former clients (subsequent representation).^^ Because such conflicts of 
interests between present and former clients are enforced not only in discipli- 
nary rules but also by courts during litigation, it is a particularly significant 
area with much case law development.^^ These types of conflicts — problems 
of simultaneous representation and subsequent representation — can have 
somewhat differing applications when the government is the client. 

B. SUBSEQUENT REPRESENTATION 

There is no general prohibition against a lawyer suing or taking an adverse 
position to a former client. Because the former client is no longer a cUent, 
there is, by definition, no problem of breach of loyalty. ^^ If a blanket prohib- 
itory rule were in force, a vast number of lawyers who had ever done any 
work for any giant corporation or the government would be disqualified sys- 
tematically in all future, unrelated cases. 

While the lawyer's duty of loyalty exists only for a present client, there is a 
requirement that the lawyer preserve the confidences and secrets of his or her 
clients,2° a requirement that continues after the termination of employ- 



17. Model Code DR 5-105 (titled "Refusing to Accept or Continue Employment if the Inter- 
ests of Another Client May Impair the Independent Professional Judgment of the Lawyer"); 
Model Code DR 5-106 (titled "Settling Similar Claims of CHents"); Model Code EC 5-14, set 
out supra note 15. 

18. See, e.g., Ceramco, Inc. v. Lee Pharmaceuticals, 510 F.2d 268, 270-71 (2d Cir. 1975) (courts 
have duty and responsibiUty to disqualify counsel for unethical conduct prejudicial to adversaries). 

19. Of course, there is always the factual question whether the client is a "former" or ongoing 
chent. See infra notes 76-93 and accompanying text (discussing this problem in IBM Corp. v. 
Levin, 579 F.2d 271 (3d Cir. 1978)). 

20. Model Code DR 4-101(A) provides: 

"Confidence" refers to information, protected by the attorney-client privilege under appli- 
cable law, and "secret" refers to other information gained in the professional relationship 
that the client has requested be held inviolate or the disclosure of which would be embar- 
rassing or would be likely to be detrimental to the client. 

Model Code DR 4-101(B) provides: 

[A] lawyer shall not knowingly: (1) Reveal a confidence or secret of his client. (2) Use a 
confidence or secret of his client to the disadvantage of the client. (3) Use a confidence or 



AGENCY HIRING OF PRIVATE ATTORNEYS 415 

ment.21 The requirement to preserve confidences and secrets applies to gov- 
ernment lawyers as well as private attorneys. ^^ 

The rule requiring disqualification of counsel in certain types of subse- 
quent representation cases is usually based on the need to safeguard against 
the danger of inadvertent use of confidential information.^^ Judge Weinfeld 
developed the basic test in the leading case of T. C. Theatre Corp. v. Warner 
Brothers Pictures, Inc. i^"^ 

I hold that the former client need show no more than that the matters 
embraced within the pending suit wherein his former attorney appears on 
behalf of his adversary are substantially related to the matters or cause of 
action wherein the attorney previously represented him, the former client. 
The Court will assume that during the course of the former representation 



secret of his client for the advantage of himself or of a third person, unless the client 
consents after full disclosure. 

Model Rules Rule 1.6 provides: 

(a) A lawyer shall not reveal information relating to representation of a client unless 
the client consents after consultation except for disclosures that are impliedly authorized 
in order to carry out the representation, and except as stated in paragraph (b). 

(b) A lawyer may reveal such information to the extent the lawyer reasonably believes 
necessary: 

(1) to prevent the cHent from committing a criminal act that the lawyer believes is 
likely to result in imminent death or substantial bodily harm; or 

(2) to establish a claim or defense on behalf of the lawyer in a controversy between 
the lawyer and the client, to establish a defense to a criminal charge or civil claim 
against the lawyer based upon conduct in which the client was involved, or to respond 
to allegations in any proceeding concerning the lawyer's representation of the client. 

21. Model Code EC 4-5 provides: 

A lawyer should not use information acquired in the course of the representation of a 
client to the disadvantage of the client and a lawyer should not use, except with the con- 
sent of his client after full disclosure, such information for his own purposes. Likewise, a 
lawyer should be dilligent in his efforts to prevent the misuse of such information by his 
employees and associates. Care should be exercised by a lawyer to prevent the disclosure 
of the confidences and secrets of one client to another, and no employment should be 
accepted that might require such disclosure. 

See also Model Code EC 4-6 ("The obligation of a lawyer to preserve the confidences and secrets 
of his client continues after the termination of his employment . . . ."); Model Rules Rule 1.6 
comment 15 ("After withdrawal the lawyer is required to refrain from making disclosure of the 
clients' confidences . . . ."). See generally Waterbury Garment Corp. v. Strata Productions, 554 F. 
Supp. 63 (S.D.N.Y. 1982). ABA Comm. on Professional Responsibility, Formal Op. 154 (1936) 
(addresses acceptability of disclosure of nonconfidential information). 

22. Model Rules Rule 1.6 comment 6 ("The requirement of maintaining confidentiality of 
information relating to representation applies to government lawyers who may disagree with the 
policy goals that their representation is designed to advance."). 

23. Hull V. Celanese Corp., 513 F.2d 568, 571 (2d Cir. 1975). See also Schloetter v. Railoc of 
Indiana, Inc., 546 F.2d 706, 709 (7th Cir. 1976) (when attorney represents party where adverse 
party is attorney's former client, attorney will be disqualified if subject matter of two representations 
substantially related). • 

24. 113 F. Supp. 265 (S.D.N.Y. 1953). 



416 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

confidences were disclosed to the attorney bearing on the subject matter of 
the representation. It will not inquire into their nature and extent. Only in 
this manner can the lawyer's duty of absolute fidelity be enforced and the 
spirit of the rule relating to privileged communications be maintained. ^^ 

Judge Weinfeld's "substantial relationship" test for subsequent representa- 
tion cases has been quoted, relied on, cited, and followed by a host of other 
court decisions, 2^ with the debate in the courts focusing primarily on the 
definition of "substantial reladonship."^^ 

The Model Rules have sought to codify the case law. They provide that a 
lawyer who formerly represented a client shall not thereafter represent an- 
other "in the same or a substantially related matter in which that person's 
interests are materially adverse to the interests of the former client unless the 
former client consents after consultation. "^^ In addition, a lawyer may not 
use the confidential or secret information "to the disadvantage of the former 
client" unless the information "has become generally known" or unless it is 
no longer privileged as secret or confidential information. ^^ 

In all subsequent representation cases, there is the initial blanket require- 
ment in the Model Code of vicarious disqualification of all members of the 
firm if any one member is subject to disqualification.^*^ The former client, 
however, may always waive the disqualification.^^ One lawyer's conflict is 
imputed to all others in the same firm. 

Regarding the former government lawyer entering into private practice or 
a private attorney entering government service — what is often called the re- 
volving door problem — the policy interests regarding subsequent representa- 
tion and imputed disqualification are somewhat different. Thus the Model 
Code, in DR 9- 10 1(B), provides a special rule regarding subsequent represen- 
tation in the government setting: "A lawyer shall not accept private employ- 



25. Id. at 268 (emphasis added). 

26. E.g., State v. Phillips, 232 Kan. 625, 656 P.2d 771 (1983); Freeman v. Chicago Musical 
Instrument Co., 689 F.2d 715 (7th Cir. 1982). 

27. Compare Chugach Elec. Ass'n v. U.S. District Court, 370 F.2d 441, 443 (9th Cir. 1966), cert, 
denied, 389 U.S. 820 (1967) (substantial relationship between issues in present and former cases not 
dispositive concerning issue of disquahfication) with American Can Co. v. Citrus Feed Co., 436 
F.2d 1125, 1130 (5th Cir. 1971) (disqualification not warranted where substantial relationship not 
shown). 

28. Model Rules Rule 1.9(a). 

29. Model Rules Rule 1.9(b). See generally Morgan, Conflicts of Interests and the Former 
Client in the Model Rules of Professional Conduct, 1980 A.B. Found. Res. J. 993. 

30. Model Code DR 5- 105(D) ("If a lawyer is required to decline employment or to withdraw 
from employment under a Disciplinary Rule, no partner or associate, or any other lawyer affiliated 
with him or his firm may accept or continue such employment."). 

31. Model Code DR 5- 105(C) ("[A] lawyer may represent multiple clients if it is obvious that 
he can adequately represent the interest of each and if each consents to the representation after full 
disclosure of the possible effect of such representation on the exercise of his independent profes- 
sional judgment on behalf of each."); see also Model Code DR 5- 105(D). 



AGENCY HIRING OF PRIVATE ATTORNEYS 417 

ment in a matter in which he had substantial responsibility while he was a 
public employee."^^ xhe purpose of this rule is to protect the public by rec- 
ognizing interests beyond merely confidences or secrets. Thus, DR 9- 101(B) 
is not limited to cases where confidential information is involved, though 
safeguarding confidences is one of the rationales behind the rule. In addition, 
while DR 9- 10 1(B) apphes only to lawyers, it does not require that the law- 
yer act as a lawyer while employed by the government. Recognizing that 
many lawyers have administrative positions which do not involve the prac- 
tice of law, the rule requires only that the lawyer, while in government ser- 
vice, was "a public employee. "^^ 

The rule was drafted in an effort to meet the special problems of the re- 
volving door between the private sector and government, and thus it is 
broader than the judicially created subsequent representation rule for private 
attorneys in the private sector. The policy considerations behind DR 9- 
101(B) are: 

The treachery of switching sides; the safeguarding of confidential govern- 
mental information from future use against the government; the need to 
discourage government lawyers from handling particular assignments in 
such a way as to encourage their own future employment in regard to those 
particular matters after leaving government service; and the professional 
benefit derived from avoiding the appearance of evil.^"^ 

There are nevertheless costs involved with an overly broad interpretation 
of DR 9- 101(B). The rule does not on its face provide for any mechanism for 
government waiver of its disqualification, and the blanket disqualification is 
automatically imputed to all other members of the entire law firm.^^ Policy 
considerations that caution against a broad, nonwaivable, imputable, disqual- 
ification rule include: 

The ability of government to recruit young professionals and competent 
lawyers should not be interfered with by imposition of harsh restraints 
upon future practice nor should too great a sacrifice be demanded of the 
lawyers willing to enter government service; the rule serves no worthwhile 
public interest if it becomes a mere tool enabling a litigant to improve his 
prospects by depriving his opponent of competent counsel; and the rule 
should not be permitted to interfere needlessly with the rights of litigants to 



32. Model Code DR 9-101(B). 

33. Id. 

34. ABA Comm. on Ethics and Professional Responsibility, Formal Op. 342, at 1, 3-4 (1975) 
(citations omitted). The opinion also states that "[pjerhaps the least helpful of the seven policy 
considerations mentioned above is that of avoiding the appearance of impropriety." Id. at 5 n.l7. 
See also Woods v. Covington County Bank, 537 F.2d 804, 814 (5th Cir. 1976) (hmitation on former 
government attorneys avoids charge that position taken by public official in anticipation of private 
gain). 

35. See Model Code DR 5- 105(D), set out supra note 30. 



418 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

obtain competent counsel of their own choosing, particularly in speciaHzed 
areas requiring special technical training and experienced^ 

The American Bar Association resolved the problem with the language of 
DR 9- 101(B) by allowing the law firms to screen out, by creating a Chinese 
Wall around, the lawyer disqualified by DR 9-101(B).37 The fiction used to 
justify these Chinese Wall mechanisms is to say that the government "con- 
sents" provided that there is adequate screening. This consent, however, is 
itself a fiction because unlike the consent of a private litigant, ^^ the govern- 
ment's consent cannot be withheld arbitrarily to secure tactical advantage. ^^ 
That is, if the screening is in place and the Chinese Wall does not leak, then 
the consent must be granted. 

Just as the Model Rules incorporated the judicially created subsequent rep- 
resentation rule, they also contained a custom tailored rule for the special 
conflicts problems of successive private and government employment.'*^ 



36. ABA Formal Op. 342, supra note 34, at 4-5 (citations omitted). See generally Morgan, supra 
note 10, (urging that former employee's disqualification should not extend to law firm or organiza- 
tion); Lacovara, Restricting the Private Law Practice of Former Government Lawyers, 20 Ariz. L. 
Rev. 369 (1978) ("Excessively stringent ethical rules should not defeat their own purposes by se- 
verely hampering the government's ability to obtain competent legal counsel."). 

37. Supra note 32 and accompanying text; infra note 38 and accompanying text. 

38. Model Code DR 5- 105(C). 

39. Kesselhaut v. United States, 555 F.2d 791, 794 (Ct. CI. 1977). See also Kadish v. Commod- 
ity Futures Trading Commission, 548 F. Supp. 1030, 1035 (N.D. 111. 1982) (court will look beyond 
government waiver of disqualification and examine effectiveness of "screen"). 

40. Model Rules Rule 1.11 provides: 

(a) Except as law may otherwise expressly permit, a lawyer shall not represent a private 
client in connection with a matter in which the lawyer participated personally and sub- 
stantially as a public officer or employee, unless the appropriate government agency con- 
sents after consultations. No lawyer in a firm with which that lawyer is associated may 
knowingly undertake or continue representation in such a matter unless: 

(1) the disqualified lawyer is screened from any participation in the matter and is 
apportioned no part of the fee therefrom; and 

(2) written notice is promptly given to the appropriate government agency to enable 
it to ascertain compliance with the provisions of this rule. 

(b) Except as law may otherwise expressly permit, a lawyer having information that the 
lawyer knows is confidential government information about a person acquired when the 
lawyer was a public officer or employee, may not represent a private client whose interests 
are adverse to that person in a matter in which the information could be used to the 
material disadvantage of that person. A firm with which that lawyer is associated may 
undertake or continue representation in the matter only if the disqualified lawyer is 
screened from any participation in the matter and is apportioned no part of the fee 
therefrom. 

(c) Except as law may otherwise expressly permit, a lawyer serving as a public officer or 
employee shall not: 

(1) participate in a matter in which the lawyer participated personally and substan- 
tially while in private practice or nongovernmental employment, unless under applica- 
ble law no one is, or by lawful delegation may be, authorized to act in the lawyer's stead 
in the matter; or 

(2) negotiate for private employment with any person who is involved as a party or 



AGENCY HIRING OF PRIVATE ATTORNEYS 419 

Under rule 1 . 1 1 , if a lawyer worked for a government agency on a particular 
"matter," that is, a contract, claim, judicial proceeding or other matter in- 
volving specific parties,"^ ^ and his or her involvement in the matter was ''per- 
sonal,'" that is, not vicarious,^^ and was "substantial,*"^^ that is, his or her 
involvement was material, clear, and weighty,"^ then the lawyer may not sub- 
sequently represent a private client in connection with that matter, even if 
that representation is not adverse to the govemment."^^ The law firm may 
represent the client, however, if the disqualified lawyer is screened from any 
participation in the matter and is apportioned no part of the fee."^^ The law 
firm must notify the appropriate government agency promptly so that it can 
approve of the screening and consent."^"^ Similarly, the private lawyer must 
not use confidential government information; if he or she has such informa- 
tion, the lawyer must be screened from firm matters where it is relevant."*^ In 
addition, the government attorney may not participate in a matter for the 
government in which he or she had participated personally and substantially 
while in earlier nongovernmental service."^^ 



as attorney for a party in a matter in which the lawyer is participating personally and 
substantially. 

(d) As used in this rule, the term "matter" includes: 

(1) any judicial or other proceeding, application, request for a ruling or other deter- 
mination, contract, claim, controversy, investigation, charge, accusation, arrest or other 
particular matter involving a specific party or parties; and 

(2) any other matter covered by the conflict of interest rules of the appropriate gov- 
ernment agency. 

(e) As used in this rule, the term "confidential government information" means informa- 
tion which has been obtained under governmental authority and which at the time this 
rule is applied the government is prohibited by law from disclosing to the public or has a 
legal privilege not to disclose, and which is not otherwise available to the public. 

41. Model Rules Rule 1.11(d)(1), set out supra note 40. 

42. Model Rules Rule 1.11(a), set out supra note 40. 

43. Model Rules Rule 1.11(a), set out supra note 40. 

44. Model Rules Terminology [10] ("'Substantial' when used in reference to degree or extent 
denotes a material matter of clear and weighty importance."). 

45. Kessenich v. Commodity Futures Trading Comm'n 684 F.2d 88, 98 (D.D.C. 1982). 

46. Model Rules Rule 1.11(a)(1), set out supra note 40. 

47. Model Rules Rule 1.11(a)(2), set out supra note 40. 

48. Model Rules Rule 1.11(b), set out supra note 40. See also Handelman v. Weiss, 368 F. 
Supp. 258 (S.D.N. Y. 1973) (disqualification of attorney based on prior employment pursuant to 
Securities Investor Protection Act included all members of firm — disqualified attorney's knowledge 
imputed to his partners). 

49. [Model Rules] Rule 1.11(c)(1), set out supra note 40. The status of the private lawyer re- 
tained by the government — whether the lawyer is a special government employee or an independent 
contractor is irrelevent for purposes of rule 1.11. See Public Hearing, supra note 8, at 57 (testimony 
of Prof. S. Cohn); id. at 63, 69 (testimony of Prof T. Morgan). Similarly, it is unimportant for 
purposes of 18 U.S.C. §§ 201-24 (1982). The government cannot avoid the requirements of § 207 
or other sections by retaining private attorneys. The distinctions of special employee or independ- 
ent contractor are not relevant for purposes of legal ethics. As Prof. Morgan has concluded: 

The special government employee issue does kick in some of the other conflict of interest 



420 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

Rule 1.11 and section 207 of title 18 do not prevent a federal employee 
from handling a case for the federal government after he or she has left the 
government, if the particular agency wants to hire him or her.^^ It has been 
suggested, however, that there should be a rule prohibiting a former em- 
ployee from being hired to represent the agency or that at least the former 
employee should be screened from participation and remuneration if the for- 
mer employee's law firm takes the case.^^ One has no idea how often this 
situation occurs, if ever. In any event, this per se prohibition is not neces- 
sary. Certainly, a government agency may engage in favoritism in hiring a 
particular attorney. Whenever an agency has the power to engage in sole 
source bidding, there is always that problem, and the way such dangers are 
reduced is by strict controls, accounting, and oversight. The blanket prohibi- 
tion of one class of individuals — those who have developed special expertise 
in a complex area — may lull one into believing that the problem of favoritism 
has been solved when it leaves open all the other types of corrupt favoritism, 
e.g., hiring an individual because he or she is a well-connected politician or 
rainmaker, or even a relative. 

The former government attorney who works, while in private practice, for 
the agency in which he or she had worked while a government attorney vio- 
lates none of the policy reasons which led to the screening device of rule 
1. 1 1.52 There is no treachery of switching sides, for the lawyer stays on the 
same side. There is no need to safeguard the use of confidential information 



statutes, but I think that you'll find that the distinction between special government em- 
ployee and independent contractor, as a practical matter for what it limits a person's 
doing and what it doesn't limit their doing, is relatively minor. That is to say, if you're a 
special government employee, you can't take the same case again as a private lawyer, for 
example. But you couldn't do that anyway even if you were an independent contractor 
under the legal ethics rules. 

Public Hearing, supra note 8, at 63 (testimony of Professor T. Morgan). 

Thus I will not focus on the nuances of 18 U.S.C. § 207 and related federal statutes in chapter 1 1 
of title 18. The discussion does not relate to my main issue of exploration: to what extent are legal 
ethics rules applicable in a special way to private attorneys retained by the government. 

Under 18 U.S.C. § 209(a), if a private attorney hired by a federal agency is treated as a "regular 
Government employee," then that person could not receive any other compensation from his law 
firm or any other source. A private lawyer hired by an agency should be treated as an independent 
contractor or a "special Government employee." 18 U.S.C. § 202(c) (1982). 

50. Model Rules Rule 1.11 governs the former government lawyer who represents a "private 
client" after leaving the government. See supra note 40. 18 U.S.C. § 207 explicitly exempts from its 
coverage representation of the United States. 

51. Public Hearing, supra note 8, at 70 (testimony of Prof. T. Morgan). 

52. Model Rules Rule 1.11 comment 1 (This rule prevents a lawyer from "exploiting public 
office for the disadvantage of a private client."). For text of rule 1.11, see supra note 40. Cf. Arm- 
strong V. McAlpin, 625 F.2d 433 (2d Cir. 1980), vacated, 449 U.S. 1106 (1981) (law firm not dis- 
qualified from representing receiver for corporation in suit against SEC because attorney at firm had 
been SEC assistant director; court found taint and possible appearance of impropriety insufficient 
reason for disqualification). 



AGENCY HIRING OF PRIVATE ATTORNEYS 421 

because the very same agency that generated the confidential information is 
the one using it.^^ There is no great problem of the government lawyer han- 
dling a particular matter to enhance his or her own future employment in the 
private sector because the agency will have no desire to hire the former gov- 
ernment attorney unless he or she handled the case very well, and that kind 
of encouragement does not hurt the government. To be sure, there is always 
the danger that the government lawyer will seek to become indispensable, to 
keep others from having knowledge of the case, so that when he or she leaves 
government service the agency will have no where else to turn. That prob- 
lem, however, should be met head on: The agency should have procedures to 
guard against too much dependence on any one individual who can always 
leave, become ill, or die. 

C. SIMULTANEOUS REPRESENTATION 

The primary rationale behind the simultaneous representation rule is the 
need to protect client loyalty. If a lawyer is representing ^4 in a matter ad- 
verse to B (e.g., divorce), and is simultaneously representing B in another 
matter (e.g., house closing), client B will rightly feel that her attorney is not 
completely loyal to her. Moreover, the other parties should be equally con- 
cerned. ^^^ In the above hypothetical, for example, there may be a diminution 
in the vigor of the lawyer's representation of client A in the divorce, if the 
lawyer really is loyal to client B because of the other representation (the 
house closing), and wishes to curry favor with client B and earn her future 
business. 

Because of the concern in the diminution in loyalty, the applicability of the 
disqualification created by simultaneous representation of adverse interests 
applies even if there is no danger that the lawyer might breach a client's 
confidences; nor is it necessary that the two cases even be substantially re- 
lated in order for a disqualification to exist. In Grievance Committee v. 



53. Contrast General Motors Corp. v. City of New York, 501 F.2d 639 (2d Cir. 1974) (former 
lawyer for Antitrust Division of Department of Justice now in private practice may not now repre- 
sent City of New York in antitrust matter against General Motors; attorney had substantial respon- 
sibility for antitrust case similar to one City hired him for in contingent fee arrangement; City 
treated as private client of lawyer in private practice). 

54. Kg., Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384, 1387 (2d Cir. 1976) (adverse represen- 
tation of existing client prima facie improper), infra notes 57-97 and accompanying text; In re Kelly 
V. Greason, 23 N.Y.2d 368, 296 N.Y.S.2d 937, 244 N.E.2d 456 (1968) ("[WJhere divided loyalties 
exist, a lawyer may inadvertently and despite the best of motives, be influenced and act detrimen- 
tally to the client, or the appearance of misconduct is unavoidable."); Jeffry v. Pounds, 67 Cal. App. 
3d 6, 136 Cal. Rptr. 373 (Cal. Ct. App. 1977) (condemning acceptance of employment adverse to 
client even though employment unrelated to existing representation); Fund of Funds, Ltd. v. Ar- 
thur Andersen & Co., 567 F.2d 225, 232-33 (2d Cir. 1977) (avoiding prejudice in action involving 
adverse representation of existing client "was a goal impossible to achieve."). 



422 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

Rottner,^^ for example, a law firm accepted an assault and battery case for 
O'Brien and against Twible. At the same time it was representing Twible in 
a collection matter against Houghton. The cases were not at all related but 
the court concluded: 

When a client engages the services of a lawyer in a given piece of business 
he is entitled to feel that, until that business is finally disposed of in some 
manner, he has the undivided loyalty of the one upon whom he looks as his 
advocate and his champion. If, as in this case, he is sued and his home 
attached by his own attorney, who is representing him in another matter, 
all feeling of loyalty is necessarily destroyed, and the profession is exposed 
to the charge that it is interested only in money. ^^ 

While some courts appear to be more flexible than others in subsequent 
representation cases, many courts — at least on a general level — seem to apply 
a fairly inflexible, mechanical disqualification in simultaneous representation 
cases. Simultaneous representation of different clients in different and ad- 
verse matters — e.g., litigation, arbitration, or a rulemaking proceeding — even 
though one representation is not at all related to the other, is virtually pro- 
hibited; even consent of the clients may not cure the defect. 

Consider the approach of the Court of Appeals for the Second Circuit. 
While it has shown some flexibility in the subsequent representation cases, ^"^ 
it has been most strict and inflexible in the simultaneous representation cases. 
This point is illustrated by Cinema 5, Ltd. v Cinerama, Inc. ^^ One attorney, 
Manly Fleischmann, was a partner in the Buffalo law firm of Jaeckle, 
Fleischmann & Mugel.^^ He was also a partner in the New York City law 
firm of Webster, Sheffield, Fleischmann, Hitchcock & Brookfield.^^ In Janu- 
ary, 1972, the Buffalo law firm began representing Cinerama and other de- 
fendants in an antitrust suit alleging monopolistic licensing of motion 
pictures in the Rochester area.^^ This suit was brought in the Western Dis- 
trict of New York. ^2 xhg Buffalo law firm also represented Cinerama in a 



55. 152 Conn. 59, 203 A.2d 82 (1964). 

56. Id. at 65, 203 A.2d at 84. See also In re A.H. Robins, Co., No. 85-010307-R, slip. op. 
(Bankr. E.D. Va., Oct. 29, 1986), discussed in 7 Bus. Law. Update, Jan./Feb. 1987, at 1, col. 3, 
(ABA Sec. of Corp., Banking & Bus. Law) (law firm disqualified from continued service as bank- 
ruptcy counsel to A.H. Robins Co. because that law firm had provided, and intended to continue to 
provide, advice on narrow range of unrelated corporate matters to Aetna Life «fe Cas. Co. second 
largest creditor of Robins). 

57. Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corp., 518 F.2d 751, 756-757 (2d Cir. 
1975) (peripheral representation exception for subsequent representation cases). 

58. 528 F.2d 1384 (2d Cir. 1976). 

59. Id. at 1385. 

60. Id 

61. Id 

62. Id 



AGENCY HIRING OF PRIVATE ATTORNEYS 423 

similar suit involving the Buffalo area.^^ That suit began in March, 1974, 
and was also brought in the Western District of New York.^ 

While those two suits were still pending — that is, while Cinerama was still 
a client of the Buffalo firm — the New York firm, representing Cinema 5, 
Ltd., sued Cinerama in the Southern District of New York alleging a con- 
spiracy among the defendants to take over Cinema 5, Ltd.^^ The Buffalo 
firm was not involved in the Southern District action and the New York firm 
was not involved in the Western District action. Cinerama was not a client 
of the New York City firm; it was a client only of the Buffalo firm. The only 
connection between the two separate firms was Mr. Fleischmann, and Mr. 
Fleischmann was apparently personally involved only in the Buffalo litiga- 
tion. His personal participation in the Buffalo litigation "was minimal, and 
we [the court] are confident that he would make every effort to disassociate 
himself from both lawsuits and would not divulge any information that came 
to him concerning either. "^^ 

Notwithstanding all of these mitigating circumstances, the Southern Dis- 
trict court disqualified the New York City firm. On appeal the New York 
City firm argued that "there is nothing substantial in the relationship be- 
tween an upstate New York conspiracy to deprive local theatre operators of 
access to films and an attempted corporate takeover in New York City."^'' 
The Second Circuit did not dispute this argument but found it irrelevant.^^ 

The court began its analysis by agreeing that the "substantial relationship" 
test is the one used to determine whether a lawyer may accept employment 
against a former client. The court distinguished the present case, stating 
"[h]owever, in this case, the suit is not against a former client, but an existing 
one."^^ Though noting that it intended no criticism of the character and 
personal integrity of the lawyers involved,'^^ the Cinema 5 court concluded: 

[T]he substantial relationship test does not set a sufficiently high standard 
by which the necessity for disqualification should be determined. That test 
may properly be applied only where the representation of a former client 
has been terminated and the parameters of such relationship have been 
fixed. Where the relationship is a continuing one, adverse representation is 
prima facie improper, and the attorney must be prepared to show, at the 



63. Id. 

64. Id. 

65. Id 

66. Id. at 1387 n.l. 

67. Id at 1385. 

68. Id. at 1386. The court stated that "the propriety of [simultaneous representation] must be 
measured not so much against the similarities in litigation as against the duty of individual loyalty 
which an attorney owes to each of his clients." Id. 

69. Id at 1386. 

70. Id at 1387. 



424 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



very least, that there will be no actual or apparent conflict in loyalties or 
diminution in the vigor of his representation. We think that appellants 
have failed to meet this heavy burden. . . . 

"Because an attorney must avoid not only the fact, but even the appear- 
ance, of representing conflicting interests," this requires his disqualifica- 
tion. Moreover, because of the peculiarly close relationship existing among 
legal partners, if Mr. Fleischmann is disqualified, his partners at the Web- 
ster finn are disquahfied as well."^^ 

The strictness of the Cinema 5 rule is illustrated by the fact that after 
learning of the conflict, the Buffalo firm offered to withdraw its representa- 
tion of Cinerama in the Western District actions. ^^ Cinerama did not accept 
that offer of withdrawal, and the district court and the Second Circuit still 
disqualified the New York City firm.'^^ Moreover, even if Cinerama had ac- 
cepted the withdrawal of the Buffalo firm's representation in the Western 
District actions, Cinerama probably still could have forced the withdrawal of 
the New York City firm. Although Cinema 5, Ltd., could argue that Ciner- 
ama's acceptance of the Buffalo firms withdrawal would amount to consent, 
the rationale of the simultaneous representation rule is that adverse represen- 
tation is a violation of the duty of loyalty to the client; even with consent in 
such circumstances, the attorney should not profit from breach of the duty of 
loyalty. ^"^ The Cinema 5 rule has broad support in the case law.'^^ 

In Cinema 5 both matters involved litigation, but that fact is not a neces- 
sary element for the simultaneous representation rule to apply. IBM Corp. v. 
Le\in ^^ made that point clear. The Third Circuit upheld the district court's 
disqualification of a law firm from further representation of plaintiffs Levin et 
al.^"^ In Levin, the law firm of Carpenter, Bennett & Morrissey (CBM) repre- 



71. Id. at 1387 (citations omitted) (emphasis in original). 

72. Id. 

73. Id 

74. Fordham, There Are Substantial Limitations on Representation of Clients in Litigation which 
Are Not Obvious in the Code of Professional Responsibility, 33 Bus. Law. 1193, 1204 (1978). See 
also Kelly v. Greason, 23 N.Y.2d 368, 374-379, 244 N.E.2d 456, 459-62, 296 N.Y.S.2d 937, 942-46 
(1968) (lawyers may not represent claimants of insurance carrier while simultaneously one of law- 
yers also carrier's employee; discipline appropriate unless and perhaps even if consent obtained 
from both clients after full disclosure); In re Boone, 83 F. 944, 952 (N.D. Cal. 1897) ("[C]Hent may 
waive a privilege which the relation of attorney and client confers upon him, but he cannot enter 
into an agreement whereby he consents that the attorney may be released from all the duties, obliga- 
tions, and privileges pertaining to the relation of attorney and client."). 

75. E.g.. Grievance Comm. v. Rottner, 152 Conn. 59, 65, 203 A.2d 82, 84 (1964), supra note 53 
and accompanying text; Jeffry v. Pounds, 67 Cal. App. 3d 6, 136 Cal. Rptr. 373 (Cal. Ct. App. 
1977) (Cal. Rule 5- 102(B) violated when, without knowledge and consent of current client, lawyer 
undertakes to represent third person suing client on unrelated matter). 

76. 579 F.2d 271 (3d Cir. 1978). 

77. The court also affirmed the district court's order ameliorating the hardship of the disqualifi- 
cation by permitting the disqualified counsel to turn over its work product to new counsel and to 
consult with new counsel for 60 days. Id. at 283. 



AGENCY HIRING OF PRIVATE ATTORNEYS 425 



sented Levin and filed suit against IBM in June, 1972, alleging antitrust vio- 
lations."^^ CBM had represented Levin, and corporations with which he was 
associated, for a number of years7^ In April, 1970, CBM wrote an opinion 
letter for IBM on a labor law problem. CBM accepted two other labor law 
assignments from IBM in July, 1970 and May, 1971.80 In April, 1972, CBM 
accepted another labor law assignment from IBM and (according to CBM), 
brought to IBM's attention the possible conflict in that CBM was contem- 
plating an antitrust suit against IBM.^* CBM said it then secured consent 
from IBM (which IBM later denied) and from Levin. ^^ During CBM's pros- 
ecution of the antitrust suit against IBM, CBM accepted four additional non- 
litigative labor relations assignments from IBM, one in February, 1974, one 
from June, 1974 to August, 1976, and two in June and July 1976.^^ 

In June, 1977, five years after the antitrust suit was filed, IBM moved to 
disqualify CBM from representing Levin et al. in the antitrust suit.^"^ The 
district court disqualified CBM and the Third Circuit affirmed. ^^ 

The court rejected the argument that IBM had constructive notice of 
CBM's representation of Levin. ^^ Although IBM's labor lawyers knew of 
CBM's representation of IBM, and IBM's antitrust lawyers in the same de- 
partment knew of CBM's representation of Levin, this constructive notice 
was found not to meet the requirements of DR5- 105(C): "Clearly, full and 
effective disclosure of all the relevant facts must be made and brought home 
to the prospective client.''^"^ 

CBM also argued that actual consent had been obtained from IBM. Even 

accepting CBM's version of the facts, the district court determined that they 

did not constitute "full and adequate disclosure as required by DR 5-105 

"88 jhe Third Circuit affirmed this ruling, though IBM was hardly a 

callow youth or befuddled widow. 

While it was clear that CBM had an ongoing relationship with Levin, 
there still was the question whether CBM had such an ongoing relationship 
with IBM. 89 Both the district court and the circuit court found that IBM 
was in fact a client of CBM because of the pattern of legal assignments: 



78. 


Id. at 274. 


79. 


Id. at 275. 


80. 


Id at 276. 


81. 


Id 


82. 


Id at 277. 


83. 


Id 


84. 


Id 


85. 


Id at 283. 



86. Id 

87. IBM Corp. v. Levin, 579 F.2d at 282 (footnote omitted). Model Code DR 5- 105(C), set 
out supra note 3 1 . 

88. Id 

89. Id 



426 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

Although CBM had no specific assignment from IBM on hand on the day 
the antitrust complaint was filed and even though CBM performed services 
for IBM on a fee for service basis rather than pursuant to a retainer ar- 
rangement, the pattern of repeated retainers, both before and after filing of 
the complaint, supports the finding of a continuous relationship. ^° 

Having concluded that CBM represented both IBM (in rendering legal 
advice in some labor matters) and Levin (in an antitrust suit), the Third Cir- 
cuit found it irrelevant that the two cases were not at all related.^ ^ The court 
cited and quoted with approval from Cinema 5,^^ and held that CBM must 
be disqualified because of its simultaneous representation of Levin and 
IBM;^3 the court required disqualification even though the two cases were 
completely unrelated and CBM never acquired any confidential information 
from IBM useful to the Levin antitrust suit. 

As Levin illustrates, a lawyer might find that an occasional client is a con- 
tinual one for disqualification purposes and that informal consent is not suflft- 
cient to cure the ethical defect. At the least, consent should be obtained in 
writing to bring home to the client the seriousness of the matter. The rule of 
Levin should apply equally to the private lawyer retained by the government. 
If consent will cure the defect, then the need for, and fact of, consent should 
be brought home to the client. If consent is not presumed for even a large, 
sophisticated corporation like IBM, then it is unlikely a court will presume 
governmental consent. If consent is needed, it must be clearly obtained. 

As Cinema 5 and other cases in this area illustrate, a lawyer may find his 
or her firm disqualified because one part of the firm is representing a client 
who is being sued by another part of the firm in a completely unrelated mat- 
ter. Because the two matters are completely unrelated, there may be no dan- 
ger of a leak of confidential information — a danger that furnishes the 
common rationale for the subsequent representation cases discussed above.^"* 
Nevertheless, this fact does not reduce the need for disqualification: In si- 
multaneous representation cases there is always the danger of divided loyal- 
ties that might cause a lawyer to temper zealous representation of one of the 
two clients. The lawyer's possible desire to retain the patronage of one client 
might serve to diminish the vigor of his representation of the other client. 

Will the broad, mechanical application of Levin mean that if lawyer A is 
retained or appointed to represent a criminal defendant in a federal case, that 
lawyer^ (or another lawyer in lawyer ^'s firm) may not simultaneously rep- 
resent the Federal Deposit Insurance Corporation (FDIC), which is part of 



90. Id. at 281. 

91. Id. 

92. Id at 280. 

93. Id at 283. 

94. See supra notes 19-30 and accompanying text. 



AGENCY HIRING OF PRIVATE ATTORNEYS 427 

the federal government, in an unrelated case?^^ Alternatively, may lawyer A 
represent the FDIC in collecting assets in a bank foreclosure, while lawyer A 
(or another lawyer in A's firm) represents a private cHent in a rulemaking 
before the FDIC (or a completely different agency, e.g.. Federal Communica- 
tion Commission)? 

In such cases, ths primary question is, who is the client? Is it the FDIC or 
the federal government? The simultaneous representation rule does not even 
begin to apply unless one first determines who the client is. "Client identity 
is ambiguous, continuously problematic, and requires resolution by con- 
scious choice. "^^ 

1 . Appearance of Impropriety 

Some commentators have argued for a broad and strict application of the 
conflicts rules as applied to attorneys who work for the government and in 
private practice.^"^ Some courts and commentators often focus on the prob- 
lem of the "appearance of impropriety," which is found in the title to DR 9- 
101 but not in any discipHnary rule.^^ Lawyers are sometimes disqualified 
from representing a client because "the conduct under scrutiny must there- 
fore be evaluated in an *eye of the beholder' context, and the lawyer must be 
disqualified when an actual appearance of evil exists, though there be no 
proof of actual evil.'*^^ 

Reliance on the term "appearance of impropriety" should not substitute 
for careful analysis and interpretation of the Model Code. As the court care- 
fully noted in Fund of Funds, Ltd, v. Arthur Andersen & Co. :^^ "When deal- 
ing with ethical principles ... we cannot paint with broad strokes. The lines 
are fine and must be so marked .... [T]he conclusion in a particular case 
can be reached only after painstaking analysis of the facts and precise appli- 
cation of precedent." ^°^ 



95. See Public Hearing, supra note 8, at 58-59 (testimony of Professor S. Cohn). 

96. G. Hazard, Ethics in the Practice of Law 43-44 (1976). 

97. Cf. Freedman, For a New Rule, 63 A.B.A. J. 724 (1977) (discussing difficulty in articulating 
adequate standards for screening disqualified attorney from others in firm). 

98. See Model Code DR 9-101 ("Avoiding Even the Appearance of Impropriety."). The title 
to canon 9 is: "A Lawyer Should Avoid Even the Appearance of Professional Impropriety." Titles 
are not disciplinary rules, but "statements of axiomatic norms." Model Code Preliminary 
Statement. 

99. Fred Weber, Inc. v. Shell Oil Co., 566 F.2d 602, 609 (8th Cir. 1977), cert, denied, 436 U.S. 
905 (1978). See also Emle Indus., Inc. v. Pantentex, Inc. 478 F.2d 562, 571 (2d Cir. 1973) (attorney 
must be disqualified where he "might have acquired information" during previous employment 
related to the subject matter of his subsequent representation) (emphasis in original); Marketti v. 
Fitzsimmons, 373 F. Supp. 637, 639 (W.D. Wis. 1974) ("Proof that no confidential information had 
been obtained would not remove the taint of disloyalty."). 

100. 567 F.2d 225 (2d Cir. 1977). 

101. Id. at 227 (footnote omitted) (quoting United States v. Standard Oil Co., 136 F. Supp. 345, 
367 (S.D.N. Y. 1955)). As Professor Wolfram has remarked, the charms of the appearance of im- 



428 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

While the undefined maxim regarding the "appearance of impropriety'* 
may be found in the ethical aspirations, ^^^ jt is significant that no disciplinary 
rule requires that a lawyer avoid the "appearance of impropriety." In For- 
mal Opinion 342, the American Bar Association has warned that if the "ap- 
pearance of impropriety" guidelines had been made a disciplinary rule, "it is 
likely that the determination of whether particular conduct violated the rule 
would have degenerated . . . into a determination on an instinctive, or even 
ad hominem basis . . . ."*°^ Courts have acknowledged, for example, that the 
"appearance" test "should not be used promiscuously as a convenient tool 
for disqualification when the facts simply do not fit within the rubric of other 
specific ethical and disciplinary rules." ^^ The "appearance" maxim is not a 
rule in itself; it is a reason why the Model Code sometimes draws mechanical 
and absolute rules, e.g., those dealing with the commingling of trust funds. 
Lawyer conduct that does not violate a disciplinary rule, however, should 
not be vulnerable to discipline because of someone's ad hoc belief that it 
looks bad to the layperson. A lawyer's defense of a guilty man may appear 
improper to the layperson, yet it is an ethical duty.*^^ 

It is interesting to note that the Model Rules reject the use of "appearance 
of impropriety." The drafters thought the term too loose and vague; it gave 
no fair warning; and it encouraged instinctive, ad hominem judgments. No- 
where do the Model Rules use that term. A definition of "appearance of 
impropriety" depends on a prior definition of "impropriety," and the Model 
Code defines neither term.'^^ 

Moreover, excessively strict conflicts rules are not cost free. They bring 
with them many disadvantages. There are severe costs to the public interest 
in making it unreasonably difficult for attorneys in private practice to repre- 
senting the government. For example, an overly restrictive rule makes it 
very difficult for the government to recruit and retain private attorneys even 
when that route is the niost economically efficient one for the government to 

propriety rationale "are only surface." C. Wolfram, Modern Legal Ethics § 7.1.4, at 319 
(1986). 

102. Model Code EC 9-3 ("After a lawyer leaves judicial office or other public employment, he 
should not accept employment in connection with any matter in which he had substantial responsi- 
bility before his leaving, since to accept employment would give the apearance of impropriety even 
if none exists."); Model Code EC 9-6 ("Every lawyer owes a solemn duty to uphold the integrity 
and honor of his profession . . . and to strive to avoid not only professional impropriety but also the 
appearance of impropriety."). 

103. ABA Comm. on Ethics and Professional Responsibility, Formal Op. 342 (1975), at 5 n.l7 
(reprinted in T. Morgan & R. Rotunda, Problems and Materials on Professional Re- 
sponsibility 109 n.l7 (3d ed. 1984). 

104. International Electronics Corp. v. Flanzer, 527 F.2d 1288, 1295 (2d Cir. 1975). 

105. Model Code EC 2-29 (compelling reasons justifying exclusion from undertaking represen- 
tation do not include "the belief of the lawyer that the defendant in a criminal proceeding is 
guilty."). 

106. R. Rotunda, Professional Responsibility 17 (1984). 



AGENCY HIRING OF PRIVATE ATTORNEYS 429 

take. It places severe burdens and opportunity costs on any law firm which 
accepts a government retainer, because it precludes the firm from accepting 
other cHents. Because lawyer disqualification is typically imputed ^^'^ to all 
other lawyers in the firm, an overly broad conflicts rule also restricts the 
lateral mobihty of lawyers among firms. '^^ It deprives the government of 
views from the outside. It deprives private sector lawyers of the benefits of 
government service, including the opportunity to acquire public service per- 
spectives. ^^^ 

2. Agency-Specific Disqualification 

The demarcation of proper boundaries must be done carefully on the basis 
of sound policy reasons rather than mere ad hominem, or instinctive reac- 
tions. Two cases illustrate the relevant distinctions, Zuck v. Alabama ^^^ and 
People V. Crawford Distributing Co.^^^ 

In Zuck, a law firm represented a defendant in a criminal case and also 
represented the prosecutor being sued in his personal capacity in a com- 
pletely unrelated civil matter. The court held that there was an actual con- 
flict of interest rendering the criminal trial unfair in the absence of the 
criminal defendant's knowing and intelligent waiver. ^^^ 

The rule in Zuck is sound because the simultaneous representation in- 
volved a reahstic and direct problem of lessened zeal. If a law firm represents 
the prosecutor in a personal matter and represents the defendant in a crimi- 
nal matter brought by the prosecutor, there is a real danger of divided loy- 
alty. Though no breach of confidences is involved, there is the reasonable 
possibility that the law firm will be less zealous in the criminal case — and less 
likely to attack the prosecutor's motives or tactics — because the prosecutor is 
also its client. Because the law firm is less likely to launch a personal attack 
on its own client (the prosecutor), the conflict of interest of ^le particular 
lawyer representing the prosecutor is automatically imputed to the entire 



107. See Model Code DR 5- 105(D); Rule 1.7, Rule 1.10(a) ("While lawyers are associated in a 
firm, none of them shall knowingly represent a client when any one of them practicing alone would 
be prohibited from doing so by rules 1.7, 1.8(c), 1.9 or 2.2."), set out supra note 13. 

108. See Model Code DR 5-105(D); id. DR 9-101(B), Model Rules Rule 1.11. While attor- 
neys can create "Chinese Walls," the erection of walls is a burden, and if the erection is unnecessary 
and not justified by sound policy reasons, the burden created is equally unnecessary. See ABA 
Comm. on Ethics and Professional Responsibility, Formal Op. 342 (1975). Moreover, the Chinese 
Wall involving the revolving door between Government service and private practice is only appUca- 
ble in subsequent representation cases, not simultaneous representation cases. See generally C. 
Wolfram, supra note 76, § 7.6.4, at 401-401 (1986). 

109. Cf Morgan, supra note 10, at 50-56. 

110. 588 F.2d 436 (5th Cir. 1979). 

111. 65 111. App. 3d 790, 382 N.E.2d 1223 (1978). 

112. Zuck, 588 F.2dat 440. 



430 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

firm, which should be disquaUfied.^^^ The creation of a Chinese Wall, which 
is sometimes allowed in the subsequent representation cases, ^^'^ does not ap- 
ply. Although the entire law firm is disqualified, a realistic concern about 
diminution in loyalty and zeal justifies imputation of the conflict. 

Moreover, there is also no significant countervailing interest in favor of 
permitting the dual representation. If the law firm were already representing 
the prosecutor, the criminal defendant could simply retain other counsel. In 
addition, if the law firm were already representing the criminal defendant, it 
should not accept the prosecutor's offer of employment. The conflict rule in 
Zuck did not place any severe burden on plaintiff" or defendant, and it did not 
disqualify the lawyers from a whole class of representation. 

In Crawford Distributing, beer distributors were convicted of fixing prices. 
On appeal, they claimed that their convictions were tainted because the de- 
fendants were represented by lawyers in a firm in which at least one member 
was a special assistant attorney general for nonantitrust civil proceedings. 
The majority found no conflict: 

If [the Special Assistant Attorney General], whose authority does not in- 
clude criminal cases, takes on the representation of a person charged in a 
criminal proceeding in which the Attorney General is involved, that attor- 
ney is not placed in a position . . . where he might have to cross-examine 
and impeach his own clients. Neither is he placed in a position . . . where 
his civil chents stand to gain by the conviction of the individual he repre- 
sents in the criminal case. The Special Assistant Attorney General for lim- 
ited civil types of cases owes no duty to the Attorney General in criminal 
matters. ^'^ 

The court's conclusion is sound. It is unrealistic to believe that the State 
Attorney General would choose a private law firm to represent it in various 
civil matters because the firm would thereby be more likely to represent in- 
competently their criminal clients and "take a fall" in criminal cases. The 
danger of diminution in zeal in the facts of Crawford Distributing is not real. 
However, if the law firm could not represent any criminal defendants or 
could not represent any civil clients in other unrelated civil matters — e.g., a 
lawsuit to determine the amount of just compensation due a store owner in a 
condemnation case, while the Special Assistant Attorney General handled 
only civil tax fraud cases against farmers — then there will be fewer lawyers 
available to be retained by the state. These lawyers will charge more because 
the supply of lawyers has been artificially constricted while the demand is 
constant. Civil clients, too, will suffer. When they hire a lawyer in a civil 
matter (e.g., a civil service suit against the government), they preclude the 



113. Model Code DR 5-105(D); Model Rules Rule 1.7, Rule 1.10(a). 

114. See Model Rules Rule 1.11. 

115. 65 111. App. 3d at 795, 382 N.E.2d at 1228. 



AGENCY HIRING OF PRIVATE ATTORNEYS 43 1 

lawyer from accepting any other work from the government (e.g., representa- 
tion of the FDIC). If so, that lawyer may be unwilhng to take future civil 
cases. Such burdens are acceptable if they are the price of sound benefits. 
The Crawford Distributing court did not find any sound benefits from an 
overly strict conflict of interest rule. 

The Model Rules appear to recognize the ambiguity existing in the Model 
Code, because the Model Rules now provide that "simultaneous representa- 
tion in unrelated matters of clients whose interests are only generally ad- 
verse, such as competing economic enterprises, does not require consent of 
the respective clients."^ ^^ This rule for large economic enterprises in the 
private sector should apply equally to the government. In other words, in 
determining who the "client" is for purposes of the simultaneous representa- 
tion rule, the usual presumption should be that the particular agency rather 
than the federal government is the client unless, for some other reason, a 
sound basis exists for concluding that there is a reasonable expectation of 
diminution in the lawyer's zeal on behalf of a client. For example, if two or 
more agencies have a close community of interests in a particular matter — 
the Department of Justice and the Federal Trade Commission on a certain 
trade issue, for example, the "chent" for purposes of the simultaneous reprcr 
sentation rule should be the agencies with that close community of interests. 

3. Simultaneous Representation of Non- Ad verse CHents 

In the above cases, where one of the matters involves representation ad- 
verse to a present chent, the law firm representing, for example, the FDIC in 
a litigative matter, should not be able simultaneously to represent a private 
client suing that particular agency, or a private chent seeking some benefit 
before that same agency — e.g., a rulemaking proceeding before the FDIC. 
Such is the learning of cases hke IBM Corp. v. Levin. ^^'' Courts often opine 
that even consent of both clients cannot waive the conflict because of the 
interest of the judicial system in vigorous representation of each client. •^^ If 



116. Model Rules Rule 1.7 comment 2. 

117. 579 F.2d 271 (3d Cir. 1978). See supra note 64 and accompanying text (discussing IBM 
Corp. V. Levin). 

118. Kg., Kelly v. Greason, 23 N.Y.2d at 374-79, 244 N.E.2d at 459-62, 296 N.Y.S.2d at 942-46 
("Where the circumstances establish such delicate conflicting relationships and inescapable divided 
loyalties that the likelihood alone of improper conduct or motivation, without any showing of harm 
and regardless of disclosure and consent, may give rise to professional misconduct."); In re Boone, 
83 F. at 956 ("I am firmly of the opinion that a contract, or waiver, or release, or consent, or by 
whatever name it may be styled, by which it is sought to release an attorney from all the duties, 
burdens, obligations, and privileges incident to the relation, is totally inoperative and void, and 
contrary to public policy.") (Morrrow, J.). Cf. Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 
F.2d 221, 228-29 (7th Cir. 1978) (simple consent by client to representation of adverse party not a 
defense to former client's motion for disqualification based on possibility that confidential informa- 
tion will be used against former client). 



432 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

neither representation involves any adverse setting — e.g., the law firm pro- 
vides an opinion letter to the FDIC on a labor law issue while simultaneously 
providing a banking opinion to a banking client — the analysis is somewhat 
different. 

The law firm must determine initially if there is any realistic likelihood 
that the interests of one client would really be adverse to another concurrent 
client. If there are no adverse interests in existence or likely to develop, there 
is no simultaneous representation problem. '^^ The law firm simply repre- 
sents multiple clients. If there are adverse interests, there is a simultaneous 
representation problem but the law firm may be able to represent both clients 
(the private client and the government agency) if both cHents consent after 
full disclosure and the lawyer reasonably believes that his or her independent 
judgment will not be compromised. *^° Because neither matter involves liti- 
gation, the conflict is subject to waiver and the courts normally will allow 
each party to consent to the multiple representation. Because neither matter 
involves litigation, there is not the same danger of a breach of loyalty existing 
when the lawyer is suing a present client. If the interests later unexpectedly 
become so adverse that the lawyer must later withdraw, withdrawal does not 
cause serious prejudice of the clients' interests because neither matter in- 
volves litigation, and, by hypothesis, there is no tribunal to disrupt. ^^^ 



119. Model Code DR 5-105(B); Model Rules Rule 1.7(a), 1.7(b). 

120. Model Code DR 5-105(C); Model Rules Rule 1.7(a)(1), 1.7(b)(1). 

121. Model Code EC 5-15 provides: 

If a lawyer is requested to undertake or to continue representation of multiple clients 
having potentially differing interests, he must weigh carefully the possibihty that his judg- 
ment may be impaired or his loyalty divided if he accepts or continues employment. He 
should resolve all doubts against the propriety of the representation. A lawyer should 
never represent in litigation multiple clients with differing interests; and there are few 
situations in which he would be justified in representing in litigation multiple clients with 
potentially differing interests. If a lawyer accepted such employment and the interests did 
become actually differing with likelihood of resulting hardship on the clients; and for this 
reason it is preferable that he refuse the employment initially. On the other hand, there 
are many instances in which a lawyer may properly serve multiple clients having poten- 
tially differing interests in matters not involving litigation. If the interests vary only 
slightly, it is generally likely that the lawyer will not be subjected to an adverse influence 
and that he can retain his independent judgment on behalf of each client; and if the inter- 
ests become differing; withdrawal is less likely to have a disruptive effect upon the causes 
of his clients. 

Model Rules Rule 1.7 comments 10-12 provide: 

[10] Conflicts of interest in contexts other than litigation sometimes may be difficult to 
assess. Relevant factors in determining whether there is potential for adverse effect include 
the duration and intimacy of the lawyer's relationship with the client or clients involved, 
the functions being performed by the lawyer, the likelihood that actual conflict will arise 
and the likely prejudice to the client from the conflict if it does arise. The question is often 
one of proximity and degree. 
[11] For example, a lawyer may not represent multiple parties to a negotiation whose 



AGENCY HIRING OF PRIVATE ATTORNEYS 433 



III. Bargaining for Legal Fees 



Some have argued that it is unseemly for the government to bargain with 
law firms and to seek fee concessions when hiring private attorneys. '^^ j^. 
deed, it has been suggested that fee concessions would invite potential mal- 
practice because law firms, in a search for profits, would use the least 
experienced and least expensive junior associates to handle complex legal 
problems. ^23 

The argument is amusing. Lawyers already have the ethical duty to 
render competent legal services, ^^"^ a duty that the client cannot waive, ^^^ and 
a duty which is enforced by private malpractice actions. ^^^ What the no fee 
concession argument says is that lawyers must be paid to be ethical. If they 
are not paid what they believe they "should" be paid, then they will cut 
comers to raise profit margins to earn what they "should earn." But if a 
lawyer is already undeterred by a malpractice action and fear of discipline, 
and fear that a knowledgeable client will detect poor quality, that lawyer 
probably is already offering shoddy service to increase his or her profit 



interests are fundamentally antagonistic to each other, but common representation is per- 
missible where the clients are generally aligned in interest even though there is some dif- 
ference of interest among them. 

[12] Conflict questions may also arise in estate planning and estate administration. A 
lawyer may be called upon to prepare wills for several family members, such as husband 
and wife, and, depending upon the circumstances, a conflict of interest may arise. In 
estate administration the identity of the client may be unclear under the law of a particu- 
lar jurisdiction. Under one view, the client is the fiduciary; under another view the client is 
the estate or trust, including its beneficiaries. The lawyer should make clear the relation- 
ship to the parties involved. 

122. Various attorneys have privately told me that they believe it "unethical" for the government 
to seek fee concessions. See also Public Hearing, supra note 8, at 62 (testimony of Prof. T. Morgan 
referring to this argument). 

123. ABA Comm. on Professional Ethics and Grievances, Formal Op. 302 (1961) ("When mem- 
bers of the Bar are induced to render legal services for inadequate compensation, as a consequence 
the quality of the services rendered may be lowered, the welfare of the profession injured and the 
administration of justice made less efficient."). 

124. Model Code EC 6-1 ("[A] lawyer should act with competence and proper care in repre- 
senting clients. He should strive to become and remain proficient in his practice and should accept 
employment only in matters which he is or intends to become competent to handle."); Model 
Code EC 6-6 ("A lawyer should not seek, by contract or other means, to limit his individual 
liability to his client for his malpractice . . . ."); Model Code DR 6-101(A)(1) ("A lawyer shall 
not handle a legal matter which he knows or should know that he is not competent to handle 
. . . ."). 

125. Model Code EC 6-6; id. DR 6-101 (A)(1); Model Code DR 6-102(A) ("A lawyer shall 
not attempt to exonerate himself from or limit his liability to his client for his personal 
malpractice."). 

126. E.g., Home v. Peckham, 97 Cal. App. 3d 404, 158 Cal. Rptr. 714 (1979) (in attorney mal- 
practice action, attorney could be found to have had duty to refer client to specialist or recommend 
assistance of specialist). 



434 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



margin.* 27 

There is no provision in the present Model Code or Model Rules setting 
any minimum fee, and if there were one, it would violate the antitrust 
laws.* 2* There is also no rule prohibiting lawyers from charging discrimina- 
tory fees; that is, a lawyer may charge client A more than client B, because 
chent ^ is a relative of another lawyer*^^ or cannot afford as much.*^^ If a 
lawyer can charge client B less because that client can afford less, then the 
lawyer must be charging client A more because that client can afford more. 
Charging someone less because of poverty is simply the other side of the coin 
of charging someone more because of affluence. If the ethics rules allow such 
price discrimination when instituted by lawyers, there can hardly be an ethi- 
cal proscription when a client bargains for lower fees because the client sup- 
plies a steady stream of business. 

It is common practice for lawyers representing insurance companies in de- 
fense work to charge less per hour than they charge other clients. Insurance 
companies are sophisticated consumers of legal service who extract fee con- 
cessions and who can go elsewhere if no concessions are forthcoming; they 
are good clients who pay their bills, provide steady work, and have somewhat 
standardized problems.*^* Indeed, the ethics rules explicitly provide that law 
firms, in setting the fee, may take into account the "nature and length of the 
professional relationship with the client" in setting the fee.*^^ 

Thus, the government should act like other sophisticated users of legal fees 
and bargain for lower rates when appropriate. Normally, market mecha- 



127. As Prof. Milton Friedman has commented on an analogous argument of the medical 
profession: 

[When] people explicitly comment on the desirability of limiting numbers to raise incomes 
they will always justify the policy on the grounds that if "too" many people are let in, this 
will lower their incomes so that they will be driven to resort to unethical practices in order 
to earn a "proper" income. The only way, they argue, in which ethical practices can be 
maintained is by keeping people at a standard of income which is adequate to the merits 
and needs of the medical profession. I must confess that this has always seemed to me 
objectionable on both ethical and factual grounds. It is extraordinary that leaders of 
medicine should proclaim publicly that they and their colleagues must be paid to be ethi- 
cal. And if it were so, I doubt that the price would have any limit. There seems Httle 
correlation between poverty and honesty. One would rather expect the opposite; dishon- 
esty may not always pay but surely it sometimes does. 

M. Friedman, Capitalism and Freedom 152 (1962). 

128. Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975). 

129. See Model Code EC 2-18 ("It is a commendable and long-standing tradition of the bar 
that special consideration is given in the fixing of any fee for services rendered a brother lawyer or a 
member of his immediate family."). 

130. See Model Code EC 2-16 ("[R]easonable fees should be charged in appropriate cases to 
clients able to pay them .... [P]ersons unable to pay all or a portion o/a reasonable fee should be 
able to obtain necessary legal services ....") (emphasis added). 

131. Cf. G. Hazard, supra note 96, at 104, 132 (1978). 

132. Model Code DR 2- 106(B)(6); Model Rules Rule 1.5(a)(6). 



AGENCY HIRING OF PRIVATE ATTORNEYS 435 

nisms determine the best fee to pay: One should not seek to pay too httle by 
hiring mere apprentices when one should be hiring masters. ^^^ The point is 
not that cut-rate fees will encourage a lawyer to provide shoddy work; in- 
stead, the point is that if a lawyer is engaged in routine bill collection, he or 
she may not be competent to handle a complex bank reorganization, no mat- 
ter what the client pays. In addition, if a competent lawyer can be found to 
engage in routine bill collection for seventy-five dollars per hour, it makes no 
sense for the government to pay one hundred dollars per hour. 

The market does not always work well when the government hires private 
attorneys because *'it is very difficult to determine precisely what a govern- 
ment agency is responsible for achieving (it has no counterpart of a profit and 
loss statement), and therefore what are gains and losses. This in turn makes 
it difficult to say for a government agency what are efficient means of maxi- 
mizing gains and minimizing loss."^^"^ Most government legal services are 
handled by its civil service. Thus, Professor Geoffrey Hazard concludes that 
"except when it employs special counsel, the government is never victimized 
by excessive fee rates. "^^^ 

One need not be so pessimistic. A typical case where the government hires 
outside counsel occurs when a bank or savings and loan fails. The FDIC 
must take care of the problem, act as a receiver, and reorganize the bank. 
The FDIC uses local counsel for such short-term problems. These counsel 
are already on the scene and familiar with local law.^^^ This procedure may 
make more economic sense than training and putting on the payroll a great 
many lawyers as permanent federal employees. It should not be difficult for 
the FDIC to determine what banking lawyers in the particular locality 
charge for that kind of work, and then try to seek some sort of concession 
from that base rate. In fact, that is what the FDIC does, and it should be 
emphasized that there is no ethical restriction to such "unseemly" bargain- 
ing. "If the subject brings to mind a counting house rather than chambers, it 
is nevertheless a necessary and therefore legitimate aspect of the practice of 
law."'^"^ The government's efforts at cost minimization are quite similar to 
corporate efforts to contain cost. The danger is not so much that the govern- 
ment will pay too little for legal services but that it will pay too much, and 
hire outside counsel who performs no unique service that could not be per- 
formed in-house with equal or better quahty and at a substantially reduced 
fee. 138 



133. G. Hazard, supra note 96, at 105 (1978). 

134. Id. 

135. Id. 

136. Public Hearing, supra note 8, at 96-99 (statement of Margaret Maguire, formerly Deputy to 
Chairman of F.D.I. C). 

137. G. Hazard, supra note 96, at 100-01 (1978). 

138. See. e.g., "Califano Fees, Roles Draw Fire, " Nat. L.J., June 23, 1986, at 2, col. 1 (over last 



436 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

Large corporations are not shy about seeking fee concessions; they try to 
contain their legal costs by using in-house counsel for legal work which is 
most suitable for them, e.g., constantly recurring problems where the repeti- 
tive nature of the work takes advantage of the learning curve of the inside 
corporate legal staff. ^^^ Outside counsel are used only when it is more cost 
efficient to hire them.*""^ If the government would establish economic criteria 
to emulate private corporations it would violate no ethical restraints and pro- 
duce a more efficient allocation of resources. 

IV. Client Control Over the Lawyer's Independent Judgment 

The client is not the ward of the lawyer. The client is instead the principal 
and the lawyer the agent. ^"^^ The lawyer, however, has a certain domain of 
professional independent judgment within which the client has no control. 
The lawyer nevertheless must abide by the ^'client's decisions concerning the 
objectives of representation . . . .''^^^^ The Model Code and Model Rules 



six years Califano collected $2.8 million in fees from U.S. Postal Service). See also "Fees for 
Califano Firm Top $600,000 in 1986, " Fed. Times, Feb. 2, 1987, at 15, col. 1 (during first 1 1 months 
of 1986, U.S. Postal Service paid $600,000 to Califano's law firm); Wolf, Block, Schorr and Solis- 
Cohen, Use of Private Counsel by Federal Government Agencies, Report to the Admin- 
istrative Conference of the United States, 46 (Sept. 1986): 

As far as the survey research could determine, Mr. Cahfano's services apparently involve 
no areas of special expertise, such as patent work, and do not involve complex litigation. 
Mr. Califano's services do not appear to have been a kind that could not be provided by 
the Postal Service's lawyers. The rentention of Mr. Califano thus deviated from use of 
private counsel by other agencies. 

139. Ryan, Costly Counsel: Regulations and Fees Boost Legal Expenses: Firms Try to Cut Them, 
Wall St. J., April 13, 1978, at 1, col. 1. 

140. The average hourly costs of in-house counsel is about half that of outside counsel. Ryan, 
supra note 139, at 33. At one major bank, inside legal costs were less than $100 per hour, while the 
bank's outside legal bills were much higher, up to $250 per hour. Stewart, Legal Landmark: Major 
Banks Loosen Links to Law Firms, Use In-House Counsel, Wall St. J., April 26,- 1984, at 1, col. 6. 
Some law firms are reluctant to raise rates "because clients would probably respond by taking more 
legal work in-house." Bus. Bull, Wall St. J., April 5, 1984, at 1, col. 5. 

141. Prate v. Freedman, 583 F.2d 42, 48 (2d Cir. 1978); Brinkley v. Farmers Elevator Mutual 
Ins. Co., 485 F.2d 1283 (10th Cir. 1973); State v. Barley, 240 N.C. 253, 254, 81 S.E.2d 772, 773 
(1954). 

142. Model Rules Rule 1.2 provides: 

(a) A lawyer shall abide by a client's decisions concerning the objectives of representation, 
subject to paragraphs (c), (d) and (e), and shall consult with the client as to the means by 
which they are to be pursued. A lawyer shall abide by a client's decision whether to 
accept an offer of settlement of a matter. In a criminal case, the lawyer shall abide by the 
client's decision, after consultation with the lawyer, as to a plea to be entered, whether to 
waive jury trial and whether the client will testify. 

(b) A lawyer's representation of a client, including representation by appointment, does 
not constitute an endorsement of the client's political, economic, social or moral views or 
activities. 



AGENCY HIRING OF PRIVATE ATTORNEYS 437 

therefore attempt to lay out basic guidelines to distinguish between those 
matters where the lawyer must secure client waiver and those where the law- 
yer is in control and prior consent is unnecessary. 

In general, the lawyer is entitled to make his or her own decisions in mat- 
ters "not affecting the merits of the cause or substantially prejudicing the 
rights of the clients"; in other cases "the authority to make decisions is exclu- 
sively that of the client . . . ."^"^^ ^g ^j^g Model Rules candidly admit, how- 
ever, sometimes a "clear distinction . . . cannot be drawn. '^ Examples help 
make the test more concrete. Thus, the client decides whether or not to ac- 
cept a settlement offer or to plead guilty, ^^s j^ criminal cases, the chent has 
the final say as to whether or not to testify on his or her own behalf. ^"^^ The 
lawyer has the duty to advise the chent of the possible effect of each legal 
alternative.'^"^ 



(c) A lawyer may limit the objectives of the representation if the client consents after 
consultation. 

(d) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the 
laywer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences 
of any proposed course of conduct with a client and may counsel or assist a client to make 
a good faith effort to determine the validity, scope, meaning or application of the law. 

(e) When a lawyer knows that a client expects assistance not permitted by the Rules of 
Professional Conduct or other law, the lawyer shall consult with the client regarding the 
relevant limitations on the lawyer's conduct. 

143. Model Code EC 7-7 provides: 

In certain areas of legal representation not affecting the merits of the cause or substantially 
prejudicing the rights of a client, a lawyer is entitled to make decisions on his own. But 
otherwise the authority to make decisions is exclusively that of the client and, if made 
within the framework of the law, such decisions are binding on his lawyer. As typical 
examples in civil cases, it is for the client to decide whether he will accept a settlement 
offer or whether he will waive his right to plead an affirmative defense. A defense lawyer 
in a criminal case has the duty to advise his client fully on whether a particular plea to a 
charge appears to be desirable and as to the prospects of success on appeal, but it is for the 
client to decide what plea should be entered and whether an appeal should be taken. 

Accord Model Rules Rule 1.2(a). 

144. Model Rules Rule 1.2 comment 1. 

145. Model Code EC 7-7; Model Rules Rule 1.2(a). 

146. Model Rules Rule 1.2(a); ABA Standards Relating to the Administration of CriminalJus- 
tice, ch. 4: The Defense Function, standard 4-5.2(a)(iii) (1979) ("Certain decisions relating to the 
conduct of the case are ultimately for the accused and others are ultimately for defense counsel. 
The decisions which are to be made by the accused after full consultation with counsel are . . . 
whether to testify on his or her own behalf"). 

147. Model Code EC 7-8 provides: 

A lawyer should exert his best efforts to insure that decisions of his client are made only 
after the client has been informed of relevant considerations. A lawyer ought to initiate 
this decision-making process if the client does not do so. Advice of a lawyer to his client 
need not be confined to purely legal considerations. A lawyer should advise his client of 
the possible effect of each legal alternative. A lawyer should bring to bear upon this deci- 
sion-making process the fullness of his experience as well as his objective viewpoint. In 



438 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 

At other times lawyers have rights with which the cHent may not interfere. 

Lawyers have a right to agree to "reasonable requests of opposing counsel 

which do not prejudice the rights of his client . . . /'^^^^ such as reasonable 

requests regarding continuances and waiver of procedural formalities. ^"^^ A 

client, to make the adversary's Ufe more uncomfortable, cannot require the 

lawyer to refuse to agree to a reasonable continuance. Lawyers also cannot 

require their clients to waive the right to decide whether to accept a 
settlement. ^50 

It has been suggested that the lawyer for the government may not have the 
same independence of judgment as a privately retained lawyer. ^^^ It is cer- 
tainly true that the government, a sophisticated client, may well decide to 



assisting his client to reach a proper decision, it is often desirable for a lawyer to point out 
those factors which may lead to a decision that is morally just as well as legally permissi- 
ble. He may emphasize the possibihty of harsh consequences that might result from asser- 
tion of legally permissible positions. In the final analysis, however, the lawyer should 
always remember that the decision whether to forego [sic] legally available objectives or 
methods because of non-legal factors is ultimately for the client and not for himself. In 
the event that the client in a non-adjudicatory matter insists upon a course of conduct that 
is contrary to the judgment and advice of the lawyer but not prohibited by Disciplinary 
Rules, the lawyer may withdraw from the employment. 

One court has stated likewise: 

An attorney may refuse to call a witness even though his client desires that the witness 
testify; may abandon a defense he deems to be unmeritorious, may stipulate that the trial 
judge could view the premises, that a witness, if called, would give substantially the same 
testimony as a prior witness, and that the testimony of a witness in a prior trial be used in 
a later action; and he may waive the late filing of a complaint. On the other hand, an 
attorney may not, by virtue of his general authority over the conduct of the action, stipu- 
late that his client's premises constituted an unsafe place to work where such a stipulation 
would dispose of the client's sole interest in the premises, nor may he stipulate to a matter 
which would eliminate an essential defense. He may not agree to the entry of a default 
judgment against his client, may not compromise his client's claim, or stipulate that only 
nominal damages may be awarded, and he cannot agree to an increase in the amount of 
the judgment against his client. Likewise an attorney is without authority to waive find- 
ings so that no appeal can be prosecuted, or agree that a judgment may be made payable 
in gold coin rather than in legal tender. An attorney also is forbidden without authoriza- 
tion to stipulate that the opposing party's failure to comply with a statute would not be 
pleaded as a defense .... 

Linsk V. Linsk, 70 Cal. 2d 272, 278-79, 449 P.2d 760, 763, 74 Cal. Rptr. 544, 547 (1969) (citations 
omitted). 

148. Model Code DR 7-101(A)(1). See also Model Code EC 7-10 ("The lawyer's duty to 
zealously represent his client does not "militate against his concurrent obligation to treat with con- 
sideration all persons involved in the legal process and to avoid the infliction of needless harm."). 

149. Model Code EC 7-38 ("A lawyer should . . . accede to reasonable requests regarding court 
proceedings, settings, continuances, waiver of formalities, and similar matters which do not preju- 
dice the rights of his clients . . . ."). 

150. Model Code EC 7-7; Model Rules Rule 1.2(a). See generally Hayes v. Eagle-Pitcher 
Indus., 513 F.2d 892 (10th Cir. 1975) (arrangement allowing majority of clients in group to govern 
rights of minority violates attorney-client relationship). 

151. Public Hearing, supra note 8, at 65 (testimony of Prof T. Morgan). 



AGENCY HIRING OF PRIVATE ATTORNEYS 439 



defer less to the lawyer's judgment, but there is no logical or policy reason 
why the ethical rules regarding the lawyer's independence should vary de- 
pending on whether the lawyer's client is the government or a private party. 
Larger business corporations are also sophisticated consumers of legal ser- 
vice and they also may grant less carte blanche authority to counsel, yet the 
ethical requirements governing a lawyer's independent professional judgment 
do not vary when the lawyer is outside counsel for a corporation or is in- 
house legal counsel. ^^^ The crucial test is not the status of the client — be it 
the government or a nongovernmental entity — but rather the sophistication 
and mental condition of the client. The lawyer should expect less direction 
from an illiterate, incompetent person than from an experienced, sophisti- 
cated client. ^53 

A client who is sophisticated and financially able simply has more ability 
to restrict the lawyer in the area where the client has the ability to exercise 
ultimate control. In contrast, an appointed counsel has more freedom to 



152. See Davis, Corporate Law Departments— A New Look at the "New Look," 18 Bus. Law. 
569, 570 (Jan. 1963) ("[A] lawyer is a lawyer whether he charges fees or receives a salary. A salary 
corrupts no more than does a fee."). 

153. Model Code EC 7-11 provides: 

The responsibilities of a lawyer may vary according to the intelUgence experience, mental 
condition or age of a client, the obligation of a public officer, or the nature of a particular 
proceeding. Examples include the representation of an illiterate or an incompetent, ser- 
vice as a public prosecutor or other government lawyer and appearances before adminis- 
trative and legislative bodies. 

In People v. Deere, 41 Cal. 3d 353, 710 P.2d 925, 222 Cal. Rptr. 13 (1985), a defendant was 
convicted of first degree murder. The defendant told his lawyer that he knew "that he does not 
deserve mercy" and that he did not want to lose "the last vestige of dignity he has" by calUng as 
character witnesses members of his family to testify that defendant should not be given the death 
penalty. Id. at 361, 710 P.2d at 929, 222 Cal. Rptr. at 18. The California Supreme Court held that 
the defense attorney was mistaken in his belief that he has "no right whatsoever to infringe upon his 
[client's] decisions about his own life." Id. at 364, 710 P.2d at 933, 222 Cal. Rptr. at 20. The court 
held that "[w]hile counsel should of course endeavor to comply with his client's wishes to the 
maximum extent consistent with his legal and ethical responsibilities, he is not ... a mere 'mouth- 
piece.' " Id. 

By contrast, in People v. Frierson, 39 Cal. 3d 803, 705 P.2d 396, 218 Cal. Rptr. 73 (1985), 
another death penalty case dealing with the allocation of decisionmaking authority between the 
defendant and his attorney, the defendant wanted to testify that he was under the influence of 
alcohol and drugs when he committed the crime. The attorney insisted that that contention only be 
presented at the penalty phase of the trial. Id at 809-12, 705 P.2d at 399-401, 218 Cal. Rptr. at 76- 
78. The court recognized that most matters of tactics are for counsel to decide, but adopting coun- 
sel's strategy here guaranteed that the defendant would face at least a life sentence without possibil- 
ity of parole. Id. at 814-15, 39 705 P.2d at 403, 218 Cal. Rptr. at 79-80. "Given the magnitude of 
the consequences that flowed from the decision," the court held the defendant had to have the right 
to choose. Id. Thus it ordered a retrial on the issue of special circumstances and penalty. Id. at 
818, 705 P.2d at 406, 218 Cal. Rptr. at 82. 

The client in Frierson was quite capable of making the reasonable decision he did, so the lawyer 
should defer to it. The client in Deere had no right to embrace the death penalty; it is for society to 
make that decision. 



440 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 



disregard a client's wishes than a retained counsel, simply because the client 
who has a lawyer appointed has no place else to go. Jones v. Barnes ^^"^ illus- 
trates this point. In that case, a defendant objected on constitutional grounds 
to the fact that his appointed counsel did not raise every nonfrivolous issue 
on appeal as requested by the defendant. The defendant filed a pro se brief 
after his appointed counsel refused to raise on appeal all of the nonfrivolous 
issues requested by the defendant. 

Chief Justice Burger, for the majority, rejected defendant's constitutional 
claim that the appointed counsel must raise every nonfrivolous issue re- 
quested by the client. ^^^ However, the Court — both the majority and the 
dissent — acknowledged that a client who had the ability to hire his or her 
own counsel could make clear, at an appropriate time such as the beginning 
of the relationship, that the lawyer must raise a particular nonfrivolous issue 
or issues. ^^^ The paying cUent could not specify that the attorney raise frivo- 
lous issues, because lawyers have a duty not to raise them. The paying client 
could insist, however, that the lawyer raise nonfrivolous issues, and if the 
lawyer objected, the paying client could hire another lawyer to take the case 
and force the first lawyer to withdraw from further representation. ^^"^ 

There is a basic core level of lawyer independence. As explained above, 



154. 463 U.S. 753 (1983). 

155. Id. at 751-52. 

156. Id. at 753 n.6 (referring to the American Bar Association, Standards Relating to 
THE Administration of Criminal Justice, Chapter 21, Criminal Appeals, "which appear to 
indicate that counsel should accede to a client's insistence on pressing a particular contention on 
appeal.") (Burger, C.J., for the Court). Burger said, however, "that the ABA may have chosen to 
recognize a given practice as desirable or appropriate does not mean that that practice is required by 
the Constitution." 463 U.S. at 753 n.6. 

See also id. at 758 n.2 ("[W]ith regard to issues involving the allocation of authority between 
lawyer and client, courts may well take account of paying clients' ability to specify at the outset of 
their relationship with their attorneys what degree of control they wish to exercise, and to avoid 
attorneys unwilling to accept client directions.") (Brennan, J., joined by Marshall, J., dissenting); id. 
at 754 ("[I]t seems to me that the lawyer, after giving his client his best opinion as to the course 
most likely to succeed, should acquiesce in the client's choice of which nonfrivolous claims to pur- 
sue.") (Blackmun, J., concurring). 

157. Model Code DR 2-1 10(C)(1)(e) provides: 

[A] lawyer may not request permission to withdraw in matters pending before a tribunal, 
and may not withdraw in other matters, unless such request or such withdrawal is because 
his client . . . insists, in a matter not pending before a tribunal, that the lawyer engage in 
conduct that is contrary to the judgment and advice of the lawyer but not prohibited 
under the Disciplinary Rules. 

See Model Rules Rule 1.16(b)(3) ("[A] lawyer may withdraw from representing a client if with- 
drawal can be accomplished without material adverse effect on the interests of the client, or if ... a 
client insists upon pursuing an objective that the lawyer considers repugnant or imprudent."). 

The client — no matter how much he or she pays — cannot force the lawyer to raise a frivolous 
issue. Model Code DR 2-109 (A)(2) provides: 

A lawyer shall not accept employment on behalf of a person if he knows or it is obvious 
that such person wishes to . . . present a claim or defense in litigation that is not warranted 



AGENCY HIRING OF PRIVATE ATTORNEYS 441 



the client, whether the government or private party, has no right to insist 
that the lawyer refuse to accede to a reasonable request by opposing counsel 
regarding a continuance. ^^^ Beyond that core level, there is a broad zone 
where the client and the lawyer have freedom to contract to limit the objec- 
tives of representation.^ 5^ We should expect that more sophisticated and 
powerful clients, such as the government and some corporations and individ- 
uals, will have more of an interest in limiting, and power to contract to con- 
trol, the lawyer's discretion concerning the objectives and means of 
representation. And then there is a core level where the lawyer has no right 
to limit the client's discretion — no matter how weak the bargaining power of 
the client — such as the client's decision whether or not to accept a 
settlement. *^^ 

The government lawyer, then, has no more or less independence of judg- 
ment than other attorneys working for private clients who are sophisticated, 
interested, and powerful consumers of legal services. 

V. The Duty of Zealous Representation 

All attorneys must represent their cUents competently. ^^^ The title to ca- 
non 7 of the Model Code also requires the lawyer to represent the client 
"zealously. "^^2 jhe Model Rules do not use that precise term because "zeal" 



under existing law, unless it can be supported by good faith argument for an extension, 
modification, or reversal of existing law. 

Model Code DR 7- 102(A)(2) provides: [A] lawyer shall not . . . knowingly advance a claim or 
defense that is unwarranted under existing law, except that he may advance such claim or defense if 
it can be supported by good faith argument for an extension, modification, or reversal of existing 
law. Model Rules Rule 3.1 provides: 

A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, 
unless there is a basis for doing so that is not frivolous, which includes a good faith argu- 
ment for an extension, modification or reversal of existing law. A lawyer for the defendant 
in a criminal proceeding, or the respondent in a proceeding that could result in incarcera- 
tion, may nevertheless so defend the proceeding as to require that every element of the 
case be established. 

158. Model Code EC 7-38; Model Rules Rule 1.2 comment 1 ("In questions of means, the 
lawyer should assume responsibility for technical and legal tactical issues . . . ."). 

159. Model Rules Rule 1.2(a),(c). 

160. Model Code EC 7-7; Model Rules Rule 1.2(a). See. e.g.. In re Montrey, 511 S.W.2d 
805 (Mo. 1974) (counsel suspended indefinitely for settling case for unauthorized amount); In re 
Stem, 81 N.J. 297, 406 A.2d 970 (1979) (counsel disbarred for secretly accepting settlement offer 
against client's wishes). 

161. Model Code DR 6- 101 (A)(1); Model Rules Rule 1.1 ("A lawyer shall provide compe- 
tent representation to a client. Competent representation requires the legal knowledge, skill, thor-